Commercial Litigation and Arbitration

If an Arbitration Award Is Overturned Because the Arbitrator Exceeded His or Her Powers, It Should be Reheard by a Different Arbitrator

Muskegon Central Dispatch 911 v. Tiburon, Inc., 2012 U.S. App. LEXIS 2149 (6th Cir. Feb. 2, 2012) (reviewing a Federal Arbitration Act arbitration):

The Michigan Court Rules permit a court to vacate an arbitration order and remand for rehearing. Mich. Comp. Laws § 3.602(J). However, the functus officio doctrine provides the circumstances in which remand to the original arbitrator, rather than a new arbitrator, is appropriate. Green, 200 F.3d at 976-77.

The Latin term "functus officio" means that "having performed his or her office," an official is "without further authority or legal competence because the duties and functions of the original commission have been fully accomplished." Black's Law Dictionary 743 (9th ed. 2009). "The policy behind the doctrine is an unwillingness to permit one who is not a judicial officer and who acts informally and sporadically, to re-examine a final decision which has already been rendered, because of the potential evil of outside communication and unilateral influence which might affect a new conclusion." Oakwood Labs. v. Howrey Simon Arnold & White, LLP, 2007 WL 1544577, at *2 (N.D. Ohio May 24, 2007) (internal citations omitted).

In general, "'once an arbitrator has made and published a final award his authority is exhausted and he is functus officio and can do nothing more in regard to the subject matter of the arbitration.'" McClatchy Newspapers v. Cent. Valley Typographical Union, 686 F.2d 731, 734 (9th Cir. 1982) (quoting La Vale Plaza, Inc. v. R.S. Noonan, Inc., 378 F.2d 569, 572 (3d Cir. 1967)); see also Beattie v. Autostyle Plastics, Inc., 552 N.W.2d 181, 184 (Mich. Ct. App. 1996) (recognizing the doctrine of functus officio). This means that where a vacated arbitration award is remanded and requires a reopening of the merits of a claim, remand to a new arbitrator is appropriate. Cf. Green, 200 F.3d at 977-78 (noting that if remand was warranted, remand would be to original arbitrator because he would simply be completing his duties by clarifying his reasoning, not reopening the merits of the case); M & C Corp. v. Erwin Behr GmbH & Co., 326 F.3d 772, 783 (6th Cir. 2003) (remanding to original arbitrator is proper where arbitrator is not reopening the merits of a case).

However, there are exceptions to the functus officio doctrine that direct when remand to the original arbitrator is appropriate: "(1) an'arbitrator can correct a mistake which is apparent on the face of his award'; (2) 'where the award does not adjudicate an issue which has been submitted, then as to such issue the arbitrator has not exhausted his function and it remains open to him for subsequent determination'; and (3) '[w]here the award, although seemingly complete, leaves doubt whether the submission has been fully executed, an ambiguity arises which the arbitrator is entitled to clarify.'" Green, 200 F.3d at 977 (quoting La Vale Plaza, 378 F.2d at 573).

In the instant case, there are two reasons supporting our decision to vacate the award and remand: (1) the Arbitrator exceeded his powers when he reviewed Tiburon's contract claim and decided that MCD had the burden to escalate, and (2) the Arbitrator was presented with MCD's contract claim but failed to review the merits of it.

We decide that Tiburon's contract claim should be remanded to a new arbitrator. Where an arbitration award is vacated because the arbitrator exceeded his or her powers, the Michigan Court Rules grant the court discretion to remand to a new arbitrator or the original arbitrator. Mich. Comp. Laws § 3.602(J)(4). Because the original arbitrator here would also be required to reopen the merits of Tiburon's contract claim, remand to the original arbitrator "implicate[s] . . . the concerns underlying the functus officio doctrine." Green, 200 F.3d at 978. Thus, a new arbitrator should review Tiburon's contract claims.

We decide that MCD's contract claim should also be reviewed by the new arbitrator. The original arbitrator, although presented with the MCD's contract claim, did not review the merits of it. Under the second exception to functus officio, we would normally remand the unreviewed claim to the original arbitrator to give him the opportunity to review it for the first time and complete his duty with respect to that claim. However, submitting Tiburon's contract claim to a new arbitrator and MCD's contract claim to the original arbitrator would be inefficient. In the interest of fairness and efficiency, we remand all claims to a new arbitrator.

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