What Qualifies as a Reasoned Award?

The issue presented in Smarter Tools, Inc. v. Chongqing SENCI Import & Export Trade Co., 2019 U.S. Dist. LEXIS 50633 (S.D.N.Y. Mar. 26, 2019), was whether the arbitral award was sufficiently reasoned.

According to the court, reasoned awards are not required in arbitration, but if the parties contract for such an award, as they did here, they are entitled to receive such a document. Upon review, the court found that the arbitrator in this case provided the parties a “barely colorable justification” for the decision, leading the court to hold that the award did not meet the necessary standard.

According to the court, Second Circuit precedent indicates that a “reasoned award” requires “something more than a line or two of unexplained conclusions, but something less than full findings of fact and conclusions of law on each issue raised before the panel.” Leeward Const. Co., Ltd. v. Am. Univ. of Antigua-College of Medicine, 826 F.3d 634, 640 (2d Cir. 2016). In other words, “[a] reasoned award sets forth the basic reasoning of the arbitral panel on the central issue or issues raised before it,” but “need not delve into every argument made by the parties.” Id.

The court also noted that while an arbitrator is not obliged to discuss each piece of evidence presented, she or he must at a minimum provide some rationale for the rejection of arguments for liability. In this case, the arbitrator provided boilerplate language that was insufficient to meet the necessary standard. Indeed, the court specifically noted that,

[i]n dismissing STI's arguments, the arbitrator conclusorily states that “[h]aving heard all of the testimony, reviewed all of the documentary proofs and exhibits, [he does] not find support for STI's claims. . . .” There is no reason given for this finding other than the negative credibility determination as to STI's expert witness, Zukerman. While this credibility determination does provide a rationale for rejecting STI's calculations of its lost profits and goodwill, it does not provide a basis for a dismissal of STI's claims in their totality.

Smarter Tools at 6. (Internal citations omitted)        

In terms of a remedy, the court did not vacate the award but instead remanded it to the arbitrator to supplement the award to the necessary standard. This course of action might raise an issue as to the application of the functus officio doctrine, but that issue likely was not argued to the court.

S.I. Strong is the Manley O. Hudson professor at the University of Missouri, School of Law in Columbia, Missouri.

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