M. SMITH, Circuit Judge:
Appellants Carolyn Burton, Robert Mills, the Mills Law Firm, and Carol LaPlant (collectively, the Burton Group) appeal from the district court's confirmation of an arbitration award allocating attorneys' fees. The Burton Group contends that the district court erred in declining to vacate the arbitration award pursuant to § 10(a) of the Federal Arbitration Act (FAA), 9 U.S.C. § 10(a). Appellee Robert Bonsignore counters that we lack jurisdiction to hear this appeal because the parties agreed to binding, non-appealable arbitration. Alternatively, Bonsignore argues that the district court correctly found that there was no basis for vacatur under the FAA.
This appeal presents a question of first impression in this circuit: Is a non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards, including review under § 10 of the FAA, enforceable?
This appeal arises out of a protracted dispute over attorneys' fees awarded in the Wal-Mart wage and hour multidistrict litigation, MDL 1735, in the United States District Court for the District of Nevada (the Wal-Mart Litigation). On April 25, 2006, the district court appointed Robert Bonsignore and Carolyn Burton as plaintiffs' co-lead counsel. Carol LaPlant was named liaison counsel for the Wal-Mart Litigation.
On December 14, 2008, the parties to the Wal-Mart Litigation participated in a mediation with the Honorable Layn R. Phillips (retired). The parties agreed to a global settlement (Settlement Agreement) whereby Wal-Mart agreed to pay up to $85 million to settle all claims against it. The parties also agreed that any fee disputes among plaintiffs' counsel would be arbitrated by Phillips (the Arbitrator).
The district court preliminarily approved the Settlement Agreement on May
During the course of the Wal-Mart Litigation, the relationships among plaintiffs' counsel deteriorated. Plaintiffs' counsel quarreled concerning the proper allocation of the $28 million fee award, and were unable to resolve their dispute. Consequently, the fee dispute was submitted to "binding, non-appealable arbitration" before the Arbitrator, as provided in the Settlement Agreement.
On January 10, 2011, the Arbitrator handed down an opinion and order allocating the $28 million fee award amongst plaintiffs' counsel. The Arbitrator allocated over $6 million to the Burton Group, over $11 million to Bonsignore, and over $730,000 to LaPlant. Bonsignore moved to confirm the Arbitrator's award on January 26, 2011, while the Burton Group filed a motion to vacate the award on April 11, 2011. The district court granted Bonsignore's motion on October 11, 2011, and found no legal basis for vacating the Arbitrator's award. The district court entered judgment on October 19, 2011, and this appeal followed.
We ordinarily have jurisdiction pursuant to 28 U.S.C. § 1291 and 9 U.S.C. § 16(a)(1)(D) to review a district court order confirming an arbitration award. However, Bonsignore questions whether we have jurisdiction in the present action because § 22.9 of the Settlement Agreement contains a non-appealability clause.
Courts have construed non-appealability clauses like that in § 22.9 in two different ways. First, as the district court concluded, the phrase "binding, non-appealable arbitration" may be understood to preclude only federal court review of the merits of the Arbitrator's decision, and not to eliminate
A second possible construction of the "binding, non-appealable arbitration" clause is that the arbitration clause divests both the district court and our court
Thus, the arbitration clause is ambiguous. We need not resolve the question of which interpretation is correct if we conclude that the second possible construction is unenforceable because it eliminates judicial review under § 10 of the FAA.
The FAA provides for expedited judicial review of arbitration awards. 9 U.S.C. § 1 et seq.
9 U.S.C. § 10(a).
Congress enacted the FAA to promulgate a "national policy favoring arbitration and [to] place[] arbitration agreements on equal footing with all other contracts...." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006); see also Hall St. Assocs., 552 U.S. at 581, 128 S.Ct. 1396. Although parties may tailor certain aspects of arbitration through private contract, and "courts must ... enforce [such contracts] according to their terms," AT & T Mobility LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011) (internal citations omitted), the Supreme Court has articulated limits on parties' freedom to modify judicial review of arbitration awards. See Hall St. Assocs., 552 U.S. at 578, 128 S.Ct. 1396 (holding that the statutory grounds for vacatur and modification of arbitration awards may not be supplemented by contract); see also Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 1000 (9th Cir.2003) (en banc) ("Private parties' freedom to fashion their own arbitration process has no bearing whatsoever on their inability to amend the statutorily prescribed standards governing federal court review.").
In Hall Street Associates, for example, Hall Street argued that the arbitration clause in its contract, which expanded judicial review beyond what is provided for in the FAA, was enforceable because arbitration is a "creature of contract." Hall St. Assocs., 552 U.S. at 585, 128 S.Ct. 1396. The Supreme Court rejected this argument, concluding that Hall Street's arbitration clause was unenforceable because it was "at odds" with the "textual features" of the FAA, which provide that the grounds for judicial review in §§ 10 and 11 are exclusive. Id. at 586, 128 S.Ct. 1396.
Just as the text of the FAA compels the conclusion that the grounds for vacatur of an arbitration award may not be supplemented, it also compels the conclusion that these grounds are not waivable, or subject to elimination by contract. A federal court "must" confirm an arbitration award unless, among other things, it is vacated under § 10. 9 U.S.C. § 9; Hall St. Assocs., 552 U.S. at 582, 128 S.Ct. 1396.
Permitting parties to contractually eliminate all judicial review of arbitration awards would not only run counter to the text of the FAA, but would also frustrate Congress's attempt to ensure a minimum level of due process for parties to an arbitration. Through § 10 of the FAA, Congress attempted to preserve due process while still promoting the ultimate goal of speedy dispute resolution. See Kyocera Corp., 341 F.3d at 998 ("The[] grounds [in § 10] afford an extremely limited review authority, a limitation that is designed to preserve due process but not to permit unnecessary public intrusion into private arbitration procedures."); see also Hall St. Assocs., 552 U.S. at 588, 128 S.Ct. 1396 ("[T]he three provisions, §§ 9-11, ... substantiat[e] a national policy favoring arbitration with just the limited review needed to maintain arbitration's essential virtue of resolving disputes straightaway."); Hoeft, 343 F.3d at 64 ("In enacting § 10(a), Congress impressed limited, but critical, safeguards onto this process, ones that respected the importance and flexibility of private dispute resolution mechanisms, but at the same time barred federal courts from confirming awards tainted by partiality, a lack of elementary procedural fairness, corruption, or similar misconduct."). If parties could contract around this section of the FAA, the balance Congress intended would be disrupted, and parties would be left without any safeguards against arbitral abuse.
In light of the above, we hold that 9 U.S.C. § 10(a), the statutory grounds for vacatur in the FAA, may not be waived or eliminated by contract.
We reject this argument because § 15.2, by its terms, concerns only the award of attorneys' fees and costs by the district court, and preserves appellate review of any decision of the district court regarding that award. It does not encompass the Arbitrator's decision concerning the allocation of those fees, which is governed solely by § 22.9.
Hoeft, 343 F.3d at 60, 63-64.