January 19, 2010

Post-Award Reconsideration: Further Comments on the Second Circuit’s Decision in T. Co. v. Dempsey Pipe

Dear Readers:

In anticipation of a more formal article to be published elsewhere that will comment upon the T. Co. v. Dempsey decision (2010 U.S. App. LEXIS 893 (2d Cir. Jan. 14, 2010)), and in the interest of the objectivity of that article (this writer was on the losing side of the reconsideration issue), I offer some remarks here for your consideration and comment.

The Second Circuit holds that the parties’ adoption of ICDR Rule 30(1), and their submission of applications to the arbitrator under that Rule, constitute “clear and unmistakable evidence” of their intention to allocate to the arbitrator, subject to very narrow and deferential judicial review, the task of determining the scope of the arbitrator’s powers under the Rule.

I wonder how the following considerations, not examined by the Court, might be seen to affect the soundness of that conclusion.

1. Article 30(1) permits a party to ask the arbitrator to correct clerical, typographical, and mathematical errors. But Section 11 of the FAA also provides that a party may apply to the District Court to correct an “evident material miscalculation of figures” or “an evident material mistake in the description of any person, thing or property referred to in the award.” Nothing in the ICDR Rules requires a party to seek corrections before the arbitrator under Article 30(1), either as a precondition for, or as a substitute for, an application to a court for such corrections under FAA Section 11. Thus, the arbitrator and the District Court have concurrent jurisdiction on the corrections issue. If a party selects the judicial path, the District Court’s presumably reasoned correction decision is reviewed de novo by the Court of Appeals. If the party selects the arbitral path, a poossibly unexplained correction decision by the arbitrator is to be reviewed, under T. Co. v. Dempsey, with extreme deference. The adverse party has no control over the forum selection when the dispute arises; the Rule 30(1) application is made unilaterally not consensually. These considerations would seem to cut against the conclusion that either the a priori agreement to arbitrate under the ICDR Rules, or the unilateral submission of a correction application under ICDR Rule 30(1), is “clear and unmistakable evidence” of both parties’ intention to have the correction application resolved by the arbitrator with only limited deferential review by a court.

2. The ICDR Rules do not provide that the arbitrator’s decision on an application under Rule 30(1) shall take the form of an award. Indeed, the Rule does not provide for the issuance of an amended award in case the application is granted. It provides only that the arbitrator shall “comply with [the] request.” And ICDR Rule 27(7), which sets out the types of awards (“final”, “interlocutory,” “interim,” “partial”) does not mention an “amended” award.

3. The ICDR Rules do not even require that the granting or denial of an application for corrections under Rule 30(1) be supported by a statement of reasons. Indeed, the Rule does not require the arbitrator even to respond if the arbitrator concludes that the application lacks merit. Given the Rules’ requirement of reasoned awards, a court should be reluctant to conclude that the parties intended that unexplained changes to an award under Rule 30(1), altering the outcome, would receive the same deferential scope of review as the initial reasoned award itself. The fact that the arbitrator in T. Co. v. Dempsey did explain himself seems to have obscured the importance of the fact that he need not have done so.

4. The categories of corrections permitted by Rule 30(1) — clerical, typographical, mathematical — are so well-defined and objective that Rule itself stands as evidence that the parties did not bargain for arbitral discretion and judgment in the Rule’s application. It is a rule whose application the layperson would reasonably expect to involve ministerial, not judgmental, decisions. Any judgmental application of the Rule is contrary to reasonable a priori expectations. If the parties had addressed themselves specifically to the question of what scope of judicial review should apply, one would expect them to have wanted full-bore de novo review because of the substantial possibility that any exercise of discretion might be a misapplication of the Rule.

I look forward to your comments.

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