Fourth Circuit Affirms Waiver of Arbitration Appellate Review

Arent Fox
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Arent Fox

On April 8, 2021, in a case of first impression, the Fourth Circuit enforced a provision of an arbitration agreement that required the parties to waive appellate review. The Court invalidated, however, language which waived judicial review altogether, preserving the district court as a “one-shot” opportunity to vacate arbitration awards.

The Arbitration Clause

The dispute arose between a cancer treatment practice, Beckley Oncology Associates (BOA), and one of its former employees, Dr. Rami Abumasmah. In 2012, the parties entered into an employment agreement containing an arbitration provision. Notably, this provision stated that it “shall be final and conclusive and enforceable in any court of competent jurisdiction without any right of judicial review or appeal.”

BOA terminated Dr. Abumasmah’s employment in 2015. A dispute regarding severance payment resulted in arbitration. BOA subsequently appealed the arbitrator’s award to the US District Court for the Southern District of West Virginia. The District Court invalidated the judicial review clause entirely, agreed to hear the case, and upheld the award on the merits. BOA appealed the decision to the Fourth Circuit.

The Fourth Circuit Holding

In dismissing the appeal, the Fourth Circuit held that the parties could agree to waive appellate, but not district court, review.

The Court acknowledged that the Federal Arbitration Act (FAA) entitled BOA to a “minimum level of due process” in confirming or vacating an arbitration award. However, it balanced that right against the policy objectives of the FAA, namely, the desire to “reduce litigation costs by providing a more efficient forum.” The Court’s decision strikes a compromise – an arbitration agreement cannot foreclose judicial review altogether but can waive appellate review.

In support of its decision, the Court noted that appellate review is routinely waived in other contexts, such as plea agreements, with stakes “far higher than the monetary award at issue here.” Additionally, while the language of the FAA provides that a party “may” appeal an order confirming or denying an arbitration award, nothing in the statute precludes an express waiver of that appeal.

The Court concluded by observing that it approved of the appellate review waiver as a means of furthering the goals of the FAA, and lamented the “almost-reflexive” appeal of arbitration awards.

Takeaway

The key holding from the Fourth Circuit’s decision is that parties may agree to limit review of arbitration awards to a “one-shot opportunity” in district court. By foreclosing appellate review, such a waiver could result in significantly reducing the time and cost of enforcing an arbitration award.

While appellate review ostensibly provides employers with another chance at reversal of an unfavorable award, in practice, such reversals are vanishingly rare. In its decision, the Fourth Circuit noted that judicial review of an arbitrator’s decision “is among the narrowest known at law” and that “our province is not to determine the merits of the dispute between the parties but rather to determine only whether the arbitrator did [their] job—not whether [they] did it well, correctly, or reasonably, but simply whether [they] did it.”

Employers in the Fourth Circuit may wish to consider including appellate waiver language in their arbitration agreements.

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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