In Burton v. Class Counsel, 2013 DJDAR 16253 (2013), the Ninth Circuit Court of Appeal decided a unique case under the Federal Arbitration Act (FAA). The court decided the issue of whether lawyers can contractually agree to preclude a court from reviewing an arbitration award. The question was of first impression in the Ninth Circuit. The Ninth Circuit concluded that the statutory grounds for review of an award under the FAA may not be waived or eliminated by contract by the parties involved in litigation.
The appeal arose from a protracted dispute. It involved multidistrict litigation relating to employees’ wage-and-hour claims against Wal-Mart. The matter settled for $85 million, and the parties agreed to have a special master resolve any fee disputes that might arise between the attorneys representing the plaintiffs.
The lower court granted almost $28 million in attorney fees to the plaintiffs. The co-lead counsel then disputed the proper allocation of the fee award. The fee dispute was submitted to arbitration, and the arbitrator allocated $6 million to the Burton firm and $11 million to the Bosignore law firm.
Bosignore moved to confirm the award in federal district court. Burton filed papers to overturn the decision of the special master. The district court confirmed the decision. After Burton appealed, Bosignore argued the Ninth Circuit had no jurisdiction to hear the appeal, as the lawyers privy to the arbitration agreement had a contractual agreement which precluded any appeals.
The Ninth Circuit affirmed the trial court’s decision. The court noted that the FAA provides that federal district courts have the power to review arbitration awards. Under the FAA, a district court can reverse an award but only under specified circumstances. Some examples include where the award was obtained by misconduct of the arbitrator.
After reviewing the record, the Ninth Circuit could find none of the justifications for vacating an arbitration award. The Ninth Circuit also concluded the court held that the FAA does not allow parties to waive the grounds for vacating an arbitration award. The court noted that allowing such a result could undermine the important public policy goals of the FAA.