USA
December 2 2009

The Federal Arbitration Act severely limits the authority of courts to vacate or modify arbitration awards. In AIG Baker Sterling Heights, LLC v. American Multi-Cinema, Inc., however, the Eleventh Circuit approved a way of getting around those limits that is available in some circumstances. During the arbitration of a dispute between a landlord and tenant over the amount of taxes owed by the tenant under the terms of the lease agreement, the tenant stipulated that it had not paid taxes for a certain six-month period, but discovered after the arbitration award was entered that it actually had paid taxes for that period. In federal court proceedings to confirm the arbitration award, the tenant persuaded the court to reduce the award by the amount of the taxes paid. The Eleventh Circuit reversed the modification of the award, holding that such relief was unavailable under the strict limitations of the FAA.   

On remand, the district court entered a final judgment confirming the arbitration award in the original amount, but then granted a Rule 60(b) (5) motion reducing the judgment by the amount of the tax payment on grounds that the payment constituted a partial satisfaction of the judgment. On appeal, the Eleventh Circuit affirmed, ruling that the FAA provisions restricting the court’s authority to review arbitration awards did not apply in such circumstances. Instead, the court pointed to section 13 of the FAA, which provides that judgments confirming arbitration awards are subject to all the provisions of law relating to those judgments, including Rule 60(b). In this instance, the court of appeals ruled, the district court was authorized to relieve the party from the judgment to the extent it had satisfied or discharged the judgment, even though the court had not been authorized to modify the arbitration award upon which the judgment was based.