Cat Charter LLC, et al v. Walter Schutenberger, et al, Eleventh Circuit Court of Appeals, July 13, 2011

In this case, a panel of the Eleventh Circuit Court of Appeals, in reversing the vacatur of an arbitration award, holds it will not second guess whether a $2,000,000 written award entered by the three arbitrator panel was “reasoned” enough, even though the award contained no rationale for the decisions made. The award announced who prevailed on each count and the amount of the award to the winner. This case is a clear example of the significant presumption in favor of arbitral awards in the federal courts. In this regard it is worth noting, as the Court did, that the case consumed the time of three experienced lawyers, including a President of the Florida Bar, for an entire week.

The district court had vacated the award on the ground the panel had “exceeded its authority” in not entering a “reasoned” award. Although the Court embraced the concept that an arbitrator could exceed his authority by doing less, it nevertheless reversed the district court’s application of the principle in this case.

On the spectrum of the types of awards parties can request, or rules can provide for, are a standard award (the result) or, at the opposite end, an award containing findings of fact and conclusions of law similar to federal court sitting without a jury. A reasoned award is on this spectrum, but is generally closer to the standard award end of the spectrum. The times a party wants a standard award will be limited as will the times a party can afford findings and conclusions. I prefer “reasoned awards” almost all the time, either as an arbitrator or party.

In light of this decision, parties should consider whether to draft agreements or negotiate for and include a definition of what the parties consider and want as a “reasoned award.” Although this ruling in this case makes sense, this type of award will not satisfy most definitions of a reasoned award.

The other practice pointer in this case is that you read your rules carefully so that you don’t wait too long to designate the type of award.  Here, the parties missed the limit, but the arbitrators appeared to allow the untimely request. You never want to be stuck if you elect late and you get a standard award in a complicated case, that you cannot explain to your client, or a findings and conclusion award that costs your client serious money.

Please contact us if there are any questions about these matters.