Arbitrators Exceeded Their Powers In Considering Waiver Issue, Although They Decided The Issue Correctly

When I read the Fifth Circuit’s recent decision in International Energy Ventures Management, L.L.C. v. United Energy Group, Limited, I thought about a news item years ago when an unlicensed individual was discovered working as a litigator in a law firm. Despite the absence of credentials, and the wrongfulness of his actions, he was considered to have been an effective advocate.

As noted by the Ninth Circuit, International Energy paints a story of a dispute that, over seven years, “has bounced back and forth between three courts and two arbitrations.” In the course of this tortured journey, two separate arbitrators determined that, by virtue of its litigation conduct, the plaintiff had waived its right to arbitrate. The Ninth Circuit, however, ruled that the arbitrators had no business determining the waiver question, as that question was one for the courts to address. Thus, the arbitrators were deemed to have exceeded their powers in violation of the Federal Arbitration Act.

However, in reviewing the substantive merits of the waiver issue, the Ninth Circuit agreed that the arbitrators got it right. Even moreso, in a decision serving to endorse the arbitrators’ analysis, the Ninth Circuit offered an extensive disagreement with the lower court which held that no waiver had occurred.

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