The relevant provisions in Gorelick declared “[j]udgment upon the award rendered by the arbitrator shall be final and nonappealable” but did not forbid all judicial review. That fact was dispositive. Indeed, the Tenth Circuit found that a clause foreclosing appellate but not district court review is a valid “compromise whereby the litigants trade the risk of protracted appellate review for a one-shot opportunity before the district court.” 427 F.3d at 829–30. Stated differently, the Gorelick opinion reasoned:
The agreement here preserves district review under 9 U.S.C. §10(a)(7), and while an unsatisfied defendant would not be able to appeal a district court order denying his application to vacate the award, so too would an unsatisfied plaintiff be unable to contest a district court’s vacation of an arbitration award in plaintiff’s favor.
Id.
So, according to Gorelick, the waiver clause aligned with “the fundamental policy behind the FAA . . . to reduce litigation costs by providing a more efficient forum.” Id. at 829.
Based on this Tenth Circuit reasoning, Judge Diaz concluded that “nothing precludes a party from waiving appellate review of [an award], as BOA expressly did here.” The authority on which BOA relied did not change the outcome. The Ninth Circuit opinion in In re Wal-Mart Wage & Hour Employment Practices Litigation, 754 F.3d 1262 (9th Cir. 2017), even if correct, did not reach the issue before the Fourth Circuit. It declared that “[permitting parties to contractually eliminate all judicial review of arbitration awards would not only run counter to the text of the FAA, but would also frustrate Congress’s attempt to ensure a minimum level of due process for parties to an arbitration.” Id. at 1268 (emphasis added).
The Ninth Circuit had reasoned that, “[j]ust as the text of the FAA compels the conclusion that the grounds for vacatur of an arbitration award may not be supplemented, it also compels the conclusion that these grounds are not waivable or subject to elimination of contract.” Yet, in a footnote, the Ninth Circuit panel stated, “We express no opinion concerning whether a non-appealability clause that precludes only appellate review is enforceable.”
Finally, the language of the BOA employment agreement covered waiver of two separate matters—the right to judicial review and the right to appellate review of the award. Based on the severability clause, the Fourth Circuit panel found that the appeal waiver was still valid because it did not concern “the essence of the contract.” What’s more, “enforcing [that] waiver in this context furthers the FAA’s policy objectives.” Quoting another panel, the opinion voiced concern over the increasing number of almost knee-jerk appeals of arbitration awards—“[t]his genre of almost-reflexive appeal of arbitration awards seems to be an increasingly common course, leading to arbitration no longer being treated as an alternative to litigation, but as its precursor.” Berkeley Oncology Assocs., No. 19-1751, slip op. at 11 (quoting Tecnocap, LLC v. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union AFL-CIO/CLC, Local Union No. 152M, No. 19-1263, 2021 WL 164677, at *4 (4th Cir. Jan. 19, 2021) (per curiam) (unpublished)).
Drafting arbitration provisions requires careful analysis of what the parties’ goals are and what the FAA permits. In a time when mandatory arbitration agreements are under scrutiny, it is more important than ever. The Fourth Circuit has now considered the concerns with waiver of court review of awards and engaged in some meaningful line-drawing with respect to those provisions.
