2d Circuit Joins 11th Circuit in Addressing Scope of “Reasoned Award”

The level of detail required in an arbitration award is determined in large part by the agreement of the parties with respect to whether the award is standard, reasoned or requires even greater specificity in the form of findings of fact and conclusions of law. The issue of what qualifies as a proper reasoned award has been the subject of some challenge. Recently, the United States Court of Appeals for the Second Circuit applied the rationale previously set forth by the 11th Circuit on this issue.

In assessing the issue with respect to a challenge to an international arbitration award that was denied before the District court in the Southern District of New York, the Second Circuit reasoned:

“[a] reasoned award is 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. A reasoned award sets forth the basic reasoning of the arbitral panel on the central issue or issues raised before it. It need not delve into every argument made by the parties. The award here satisfies that standard: while it does not provide a detailed rationale for each and every line of damages awarded, it does set forth the relevant facts, as well as the key factual findings supporting its conclusions. . . . No more is needed.”

In reaching its determination, the Court relied substantially on the rationale set forth in other circuits including the Eleventh Circuit.

In Cat Charter, LLC v. Schurtenberger, 646 F.3d 836 (11th Cir. 2011), the Court addressed whether the arbitrators “exceeded their powers” under the Federal Arbitration Act when they failed to issue a “reasoned award” pursuant to the agreement of the parties. The arbitration had proceeded according to the Commercial Rules of the American Arbitration Association and when the Panel issued a unanimous, albeit brief, award, the losing party moved for vacatur claiming the Panel failing to satisfy the obligation to provide a “reasoned award.” The district court agreed that the award was insufficient, vacated the award and declined to remand the case back to the Panel ruling the doctrine of functus officio precluded it from doing so.

On appeal, the Eleventh Circuit reversed and held that the award met the requisite standard: “Logically, the varying forms of awards may be considered along a ‘spectrum of increasingly reasoned awards,’ with a ‘standard award’ requiring the least explanation and ‘findings of fact and conclusions of law’ requiring the most. In this light, therefore, a ‘reasoned award is something short of findings and conclusions but more than a simple result.'” (internal citations omitted).

The Court determined that the award met the requisite standard finding “the Panel provided a detailed explanation for the only conclusion that truly required it” and specificity where needed, concluding:

“In the present case, three validly-appointed arbitrators oversaw a five-day hearing and rendered a thoughtful, reasoned award. We decline to narrowly interpret what constitutes a reasoned award to overturn an otherwise apparently seamless proceeding. The parties received precisely what they bargained for — a speedy, fair resolution of a discrete controversy by an impartial panel of arbitrators skilled in the relevant areas of the law. To vacate the Award and remand for an entirely new proceeding would insufficiently respect the value of arbitration and inject the courts further into the arbitration process than Congress has mandated. As such, the Award should be confirmed and this controversy should be put to rest once and for all.”

The Eleventh Circuit upheld the award under the facts before it and its rationale in doing so was recently adopted by the Second Circuit. The case in Leeward Construction Co. Ltd. v. American University of Antigua, No. 13-1708-cv (2d Cir. June 24, 2016) and the opinion is here.

Ava Borrasso is the principal of Ava J Borrasso, P.A., a Miami-based law firm that concentrates on business and international arbitration and litigation. She also serves as an Arbitrator and is a member of the commercial panel of the American Arbitration Association.