In Re: Wal-Mart Wage and Hour Employment Practices Litigation, et al. v. Class Counsel and Party to Arbitration, et al., 737 F.3d 1262 (9th Cir. 2013)

In In Re: Wal-Mart Wage and Hour Employment Practices Litigation, et al. v. Class Counsel and Party to Arbitration, et al., 737 F.3d 1262 (9th Cir. 2013), the 9th Circuit Court of Appeals, in a question of first impression, held that a non-appealability clause in an arbitration agreement was unenforceable where it eliminated all federal court review of any arbitration awards, including review under 9 U.S.C. § 10 of the Federal Arbitration Act (FAA). Id. at 1264.

As part of the settlement of wage and hour multi-district litigation, the district court made an attorneys’ fee award. The dispute before the court arose when counsel could not agree regarding the proper allocation of those fees and subsequently arbitrated their dispute according to the terms of the settlement agreement, which provided for “binding, non-appealable arbitration.”  Id. 1265.  After the arbitrator rendered an award, the parties filed cross motions to vacate or confirm the award, and the district court granted the motion to confirm. Id.

On appeal, the appellee argued that the 9th Circuit lacked jurisdiction to hear the appeal because of the non-appealability clause in the arbitration agreement. Upon reviewing the clause, the 9th Circuit determined it was ambiguous, and noted that some courts have construed such clauses to preclude only review of the merits of an arbitral decision, while others have construed them to preclude all federal court review of any kind (including district court review under 9 U.S.C. § 10).  The 9th Circuit then concluded that the plain language of 9 U.S.C. § 10 of the FAA“compels the conclusion that these grounds are not waivable, or subject to elimination by contract” – in the same way that the Supreme Court’s decision in Hall Street Associates LLC v. Mattel, Inc. 552 U.S. 576 (2008) previously held that the FAA’s grounds for vacatur were exclusive and could not be contractually expanded.  Id. at 1267. The 9th Circuit further explained that holding otherwise would “frustrate Congress’ attempt to ensure a minimum level of due process for parties to an arbitration,” and that “[i]f parties could contract around this section of the FAA . . . parties would be left without any safeguards against arbitral abuse.”  Id. at 1268.  As a consequence, the court held that “the statutory grounds for vacatur in the FAA [] may not be waived or eliminated by contract.”  Id.