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By David K. Nelson*

Parties involved in the construction industry have long been familiar with mandatory arbitration as a dispute resolution procedure.

Originally arbitration was said to be more efficient and less expensive than litigation. Over time, experience has shown that arbitration is not necessarily more efficient or more timely.

Regardless of its potential benefits, one fact remains absolute – an arbitration ruling is almost always final and therefore not subject to appeal or review.  The Louisiana Supreme Court recently confirmed this fact in the case of Crescent Property Partners, LLC v. American Manufacturers Mutual Insurance Company, et al; 158 So.3d 798, 2014-C-0969 c/w 2014-C-0973 (La. 1/28/15).  In Crescent, the general contractor and its subcontractors filed motions for summary judgment with the arbitration panel alleging that plaintiff’s claims were preemptive because they were not filed within five years of the issuance of the Certificate of Occupancy.  The arbitration panel, relying upon the case of Ebinger v. Venus Construction Corporation, 10-2516 (La. 7/1/11), 65 So. 3d 1279, found that Ebinger dictated the retroactive application of the 2003 amendment to La. R.S. 9:2772 and ruled that plaintiff’s claims were untimely asserted outside the preemptive period.  The defendants filed suit in district court to confirm the arbitration ruling.  Plaintiffs opposed the filing and moved to vacate the award on the grounds that the arbitration panel ruling was not in accordance with law. The district court denied plaintiff’s application to vacate the award and confirmed the arbitration ruling the judgment of the district court.

Plaintiffs, thereafter, sought review in the Court of Appeal. The Court of Appeal reversed the trial court finding that the arbitration panel had incorrectly concluded the 2003 amendment reducing the time limitation from seven years to five years could be retroactively applied to preempt plaintiff’s claims. The general contractor and subcontractor thereafter requested the Louisiana Supreme Court to consider the issue.  The Supreme Court granted the writ “to determine whether the Court of Appeal ruling vacating the arbitration panel decision was proper.”

The Supreme Court recognized that the grounds for vacating an arbitration award are very narrow, and are limited to the exclusive grounds set forth in La. R.S. 9:4210, which provides:

In any of the following cases the court in and for the parish wherein the award was made shall issue an order vacating the award upon the application of any party to the arbitration.

  1. Where the award was procured by corruption fraud or undue means.
  2. Where there was evident partiality or corruption on the part of the arbitrators or any of them.
  3. Where the arbitrators were guilty of misconduct and 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.
  4. Where the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final and definitive award upon the subject matter submitted was not made.

The Supreme Court ruled that the Court of Appeal erred in vacating the arbitration panel’s award stating: “The upshot of both the Court of Appeal’s reasoning and the arguments of Crescent is that the panel just got it wrong on the law. We reiterate our long line of jurisprudence that an error of fact or law will not invalidate an otherwise fair and honest arbitration award.” Crescent at 808.

The takeaway from this ruling is that absent proof of dishonesty, bias, bad faith, willful misconduct, on the part of an arbitrator, the arbitration ruling will be final and not subject to appeal—even if the arbitrator gets it wrong on the law and/or facts.

* Mr. Nelson serves as the Chair of the Construction and Commercial Litigation practice group of the Louisiana Association of Defense Counsel.