The Ninth Circuit recently examined a question of first impression: whether a non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards is enforceable? The agreement at issue provided for “binding, non-appealable arbitration,” and the Ninth Circuit decided such clauses are generally not enforceable. In re Wal-Mart Wage and Hour Employment Practices Litigation, Nos. 11–17718, 11–17778 (9th Cir. Dec. 17, 2013) (click here for a copy of the decision).
The Ninth Circuit found that parties cannot waive the grounds for vacatur set forth in Section 10 of the FAA (e.g., corruption, fraud, evident partiality, arbitrator misbehavior, where the arbitrators exceeded their powers). The Ninth Circuit reasoned that permitting a party to waive the grounds for vacatur would conflict with the text of the FAA because the FAA provides that a court “must” confirm an arbitration award unless the award is vacated under Section 10. The Ninth Circuit explained that permitting a party to waive judicial review of an arbitration award would conflict with this mandatory language of the FAA. In addition to this textual argument, the Ninth Circuit also made an interesting due process argument: permitting parties to eliminate all judicial review would “frustrate Congress’s attempt to ensure a minimum level of due process for parties to an arbitration.” In other words, the grounds for vacatur found in Section 10 provide a non-waivable constitutional safeguard against “arbitral abuse.”