Court Confirms “Baseball Arbitration” Award, Finds Party Alleging Unfairness Was Caught Looking When It Failed to Object

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The U.S. District Court for the Eastern District of Missouri confirmed an arbitration award in favor of Clayco Inc. in a dispute with its subcontractor arising from a construction contract. The parties’ contract provided detailed dispute resolution procedures comprising 13 paragraphs providing for mediation followed by arbitration if the mediation was unsuccessful. However, the contract also provided for an “alternate condensed and accelerated procedure” that could be “invoked” at Clayco’s option. This condensed procedure called for eight hours of mediation “followed by a ‘baseball arbitration’ in which the mediator immediately takes the role of arbitrator, each side submits a best and final offer and the arbitrator chooses of the two offers as the award.”

Clayco invoked the “baseball arbitration” procedure by letter to the subcontractor and the American Arbitration Association (AAA), as provided in the parties’ contract. More than nine months later, the mediation and arbitration were held according to the condensed procedure, and the arbitrator selected Clayco’s best and final offer as the award, resulting in an approximate $1.7 million award.

The subcontractor sought to vacate the award, arguing that Clayco had not properly “invoked” the procedure because it never received a copy of Clayco’s letter to the AAA selecting the condensed procedure. The court found that whether the subcontractor received a copy of the letter was irrelevant under the terms of the parties’ contract, which only required Clayco to make a “written application” to the AAA. Furthermore, the subcontractor had ample notice of the mediation and arbitration and never “made a formal written objection” to the proceeding. Instead, after the unfavorable arbitration award was rendered, it submitted an affidavit of counsel to the court in support of its motion for vacatur stating that counsel “asserted that [the ‘baseball arbitration’ was unfair.”

The court described the subcontractor’s argument as a “flimsy post hoc excuse[]” and stated that “a party may not sit idle through an arbitration procedure and then collaterally attack that procedure on grounds not raised before the arbitrators when the result turns out to be adverse,” quoting Marino v. Writers Guild of America, East, Inc., 992 F.2d 1480 (9th Cir. 1993). Since the arbitration process took place according to the parties’ contract, and the subcontractor had waived any procedural defects even if it did not, the court confirmed the award.

Clayco, Inc. v. Food Safety Grp., Inc., No. 4:20-mc-00739 (E.D. Mo. Mar. 8, 2021).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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