Parties Can Consent to Give An Arbitrator More Power in Deciding Disputes (Part 4)

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Arbitration Attorney

In Part 2 of this Arbitration Law series, I examined the court process to turn an arbitration award into a judgment.  The court’s role in reviewing an arbitration award (if one side decides to appeal the arbitration decision) is limited to a few legal grounds, one being that the contract being was fraudulently entered into or the arbitrator did not conduct the proceedings properly.  With an improper conduct allegation an arbitrator can be liable for whether he or she exceeded his or her powers by deciding something that was not submitted to him or her is the case.  Now you might be thinking to yourself that this seems unnatural.  If the arbitrator is asked to decide two matters, and gives an opinion on a totally unrelated matter, then clearly the arbitrator is not doing his or her job, and the award should be thrown out, no questions asked.  But sometimes, an arbitrator steps over the boundary lines in subtle ways.  And in the case of Hamilton Park Health Care Center LTD. V. 1199 SEIU United Healthcare Workers East.

The case involved a long-term care facility and the union that represents the workers.  The collective bargaining agreement (CBA) allowed for arbitration when it came to how much money the company would contribute to pay the health benefits of its employees.  Both sides disputed the amount that should be paid, and sent the issue to arbitration.  The issue was submitted in November 2011, and the increase would go into effect from February 28, 2012 to February 28, 2013, the last year that the agreement was effective.  Therefore, the arbitrator was only allowed to figure out if and when the increase should be paid during that time period.

However, the arbitrator wanted to fashion a remedy that would require the company to pay the increase in health benefits over a span of years beyond the time period, but at a smaller increase than what the union was looking for.  He asked both parties orally if they would consent to expand his jurisdiction to do something like this, and both sides agreed.  So he awarded this remedy, including in the award a provision that allowed the union to reopen negotiations at the end of the subsequent CBA, in which it could submit any resulting disputes to binding arbitration.  On a complaint to vacate this award by the facility, the Court of Appeals for the Third Circuit held that the facility consented to allow the arbitrator to fashion an award beyond the powers granted to him under the CBA during the case with the arbitrator, and therefore could not just turn around and have the award thrown out on this basis.  However, the provision by which subsequent disputes in the subsequent agreement could be sent to binding arbitration was an exercise of power not granted to by the arbitrator and not consented to by the facility, so that portion of the award was struck out from the judgment.

Based on its desire to not interfere with arbitration proceedings, the court’s decision is not surprising.  It also is logical, because if the parties agree to let the arbitrator go beyond the scope of his duties, the court is not going to interfere. I am surprised, though, that the court accepted the arbitrator’s testimony alone that the facility orally agreed to expand his jurisdiction, and gave it such great weight in its decision.  For something like this, it should almost be required that the arbitrator have both parties sign off so there is written proof of the agreement.  But as we have seen, courts favor disputes settling over arbitration, and if there are doubts about whether to vacate awards, they are likely to side in favoring of confirmation over vacation.

To discuss your NJ Arbitration matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

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