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Interim Injunctive Award Issued by Emergency Arbitrator Pending Constitution of, and Subject to Review by, Arbitration Panel Is Not Sufficiently Final to Permit Judicial Review

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From Chinmax Med. Sys. v. Alere San Diego, Inc., 2011 U.S. Dist. LEXIS 57889 (S.D. Cal. May 27, 2011):

On October 13, 2010, Chinmax filed a demand for arbitration with the International Centre for Dispute Resolution division of the American Arbitration Association ("AAA"). On October 15, 2010, Alere filed a request for an emergency interim award pursuant to Article 37 of the American Arbitration Association International Dispute Resolution Procedures.*** On November 23, 2010, an emergency arbitrator issued an "Order re [Alere's] Request for Emergency Interim Award Pending Arbitration." ***

In the Petition, Chinmax alleges that the emergency arbitrator did not have jurisdiction to issue the interim order on the grounds that the parties' agreement only allowed arbitration by a three arbitrator panel for final resolution and the parties' agreement provided that they would seek interim or provisional orders through a court of competent jurisdiction. Chinmax alleges that the emergency arbitrator lacked authority to issue the interim order under Article 37 of the International Dispute Resolution Procedures on the grounds that the arbitrator failed to find that there was an emergency, that the obligations of the interim order alter the status quo between the parties, and that the interim order manifestly disregards the law.***

Historically, for an arbitration award to be subject to judicial review, it must be final and binding as to all of the issues presented to the arbitrator. See Millmen Local 550, United Broth. of Carpenters and Joiners of Am., AFL-CIO v. Wells Exterior Trim, 828 F.2d 1373, (9th Cir. 1987); New United Motor Mfg., Inc. v. United Auto Workers Local, 617 F.Supp.2d 948, 954 (N.D. Cal. 2008) (citing ConnTech Development Co. v. University of Connecticut Educ. Properties, Inc., 102 F.3d 677, 686 (2nd Cir. 1996)). "[B]ecause of the Congressional policy favoring arbitration when agreed to by the parties, judicial review of non-final arbitration awards 'should be indulged, if at all, only in the most extreme cases.'" Pac. Reins. Mgmt. Corp., 935 F.2d at 1022 (citations omitted) (emphasis in original).

In Pacific Reinsurance Management Corp. [Pac. Reins. Mgmt. Corp. v. Ohio Rein. Corp., 935 F.2d 1019, 1023 (9th Cir. 1991)], the Ninth Circuit considered as a matter of first impression "[w]hether temporary equitable relief that is necessary to prevent a potential final award from being meaningless can be confirmed and enforced in the district courts." Pac. Reins. Mgmt. Corp., 935 F.2d at 1022. Prior to deciding the merits of the arbitration, the arbitration panel issued an 'interim final order' which created an escrow account and ordered the deposit of disputed funds in that escrow account. Id. The Ninth Circuit stated that judicial confirmation of the "interim final award" was "not inconsistent ... with the policy favoring arbitration ... [g]iven the potential importance of temporary equitable awards in making the arbitration proceedings meaningful...." Id. at 1023. The Ninth Circuit stated that "court enforcement of [final temporary equitable awards], when appropriate, is not an undue intrusion upon the arbitral process, but is essential to preserve the integrity of that process." Id. (quotation omitted). The court held that: "temporary equitable orders calculated to preserve assets or performance needed to make a potential final award meaningful ... are final orders that can be reviewed for confirmation and enforcement by district courts under the [Federal Arbitration Act]." Id.

"[C]ourts go beyond a document's heading and delve into its substance and impact to determine whether the decision is final." Publicis Commc'n v. True N. Commc'ns, Inc., 206 F.3d 725, 729 (7th Cir. 2000); see also Pac. Reins. Mgmt. Corp., 935 F.2d at 1030 ("finality should be judged by substance and effect, not by superficial technicalities."). "Where an arbitrator retains jurisdiction in order to decide a substantive issue the parties have not yet resolved, this retention of jurisdiction indicates that the arbitrator did not intend the award to be final." Orion Pictures Corp. v. Writers Guild of Am., W., Inc., 946 F.2d 722, 724 (9th Cir. 1991) (quotation omitted); Hyosung (America) Inc. v. Tranax Tech. Inc., Case. No. C 10-0793 VRW, 2010 WL 1853764, at *4 (N.D. Cal. May 6, 2010) (explaining that when determining whether an arbitration award is final, courts consider whether the arbitrator intended the award to be final); see also New United Motor Mfg., Inc., 617 F. Supp. 2d at 958 (finding that an arbitration award regarding liability only was final, in part, on the grounds that "[t]here [was] no evidence that either party believed that either the parties or the Arbitrator would be able to reopen or revisit the liability phase once [the arbitrator] issued his award.").

In this case, prior to the constitution of the full arbitration panel, a single emergency arbitrator issued a temporary equitable order pursuant to Article 37 of the AAA International Dispute Resolution Procedures. Although the interim order required Chinmax to take certain conservatory actions within ten days, the interim order also [states] that the temporary equitable order was issued "in order to facilitate any consideration by the full panel of conservancy ...." and the interim order would "remain in effect pending review of the full arbitration tribunal, once appointed, and thereafter as the tribunal may order" Id. at 27-28 (emphasis added). In addition, Article 37 of the AAA International Dispute Resolution Procedures provides: "Once the tribunal has been constituted, the tribunal may reconsider, modify or vacate the interim award or order of emergency relief issued by the emergency arbitrator." (ECF No. 14-3 at 17) (emphasis added). When considering the "substance and impact" of the interim order, this Court concludes that the interim order was not a final order and is not subject to review by this Court. Publicis Commc'n, 206 F.3d at 729. The rules provide that the full arbitration panel has the authority to "reconsider, modify or vacate" the interim order; thus, the rules expressly retained jurisdiction over the issue for further consideration by the full panel. See Orion Pictures Corp., 946 F.2d at 724. The arbitrator stated that the interim order was issued to facilitate a conservancy order by the full arbitration panel; thus, the arbitrator did not intend the interim order to be final. See Hyosung (America) Inc., 2010 WL 1853764, at *4; New United Motor Mfg., Inc., 617 F. Supp. 2d at 958. The Court concludes that the evidence does not present an "extreme" case permitting judicial review of a non-final order because the interim order is expressly subject to reconsideration, modification, or vacatur by the full tribunal. The Motion to Vacate Arbitration Award filed by Petitioner Chinmax (ECF No. 10) and the Petition seeking the same relief (ECF No. 1) are DENIED.

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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