July 15, 2020 Practice Points

Motion to Vacate Award Sanctioned

The U.S. District Court for the Northern District of Alabama ruled that an award of sanctions was appropriate to "protect arbitration as a remedy."

By Mark Kantor

On June 15, 2020, in Hill v. CAG2 of Tuscaloosa, LLC d/b/a Carlock CDJR of Tuscaloosa, 7:19-cv-02044-LSC, the U.S. District Court for the Northern District of Alabama granted a motion for sanctions against a party for filing a groundless motion to vacate an arbitration award. 

The district court noted that in 2006

the Eleventh Circuit provided "notice and warning" that sanctions may result when losing parties assert unfounded challenges to arbitration awards. See B.L. Harbert Int'l, LLC v. Hercules Steel Co., 441 F.3d 905, 913-14 (11th Cir. 2006), abrogated on other grounds by Frazier, 604 F.3d at 1321. The Eleventh Circuit made clear that it was "exasperated by those who attempt to salvage arbitration losses through litigation that has no sound basis in the law applicable to arbitration awards" and that these sanctions are grounded in "the purposes of the FAA and to protect arbitration as a remedy." 441 F.3d at 914. . . . [Citations omitted]

Here, the court found that Carlock appeared to be trying to salvage its arbitration loss "through litigation that has no sound basis in the law applicable to arbitration awards. . . ." The court noted that Carlock based its motion on old case law that had been expressly overruled and made no meaningful attempt to explain how Federal Arbitration Act sections 10 or 11 might support its argument for vacatur.

Instead, Carlock filed a six-page motion that cited no controlling authority and failed to respond to plaintiffs' request for sanctions. Given the "notice and warning" from the Hercules Steel opinion, the court ruled that an award of sanctions was appropriate to "protect arbitration as a remedy."

Mark Kantor is a member of the College of Commercial Arbitrators in Washington, D.C.


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