Arbitration seems to be at the forefront at the Sixth Circuit’s docket right now, as numerous published opinions have been issued recently on various facets of the arbitration process. Yesterday, the Court handed down an interesting decision in Savers Property and Casualty Insurance Company v. National Union Fire Insurance Company of Pittsburgh, PA. The case has a complicated procedural backdrop, but the gist of the issue was whether a party to an arbitration agreement that was in the middle of an arbitration could effectively seek interlocutory judicial review during ongoing arbitration proceedings. The complaining party alleged that after the arbitration panel issued an interim final reward, and turned it sights to damages, situations arose that suggested the possibility of partiality of one of the arbitrators. After having its applications denied by the arbitration panel, the party turned to state court, and after removal, found a willing audience with the district court.
Although the district court acknowledged that courts are generally prohibited from reviewing arbitration proceedings until a final reward has been issued, it nevertheless intervened based on the threat of irreparable harm and the prospect for success on the merits under the traditional injunction test. The Sixth Circuit, however, reversed, explaining, “Our court and several of our sister circuits have interpreted . . . the overall structure of the FAA to preclude the interlocutory review of arbitration proceedings and decisions.” The Court pointed both to the text of the FAA, which did not permit this type of interlocutory review, as well as to policy considerations, explaining that allowing interim review by the courts would effectively eradicate many of the benefits of arbitration.
The district court also relied on Section 2 of the FAA to support its authority to issue an injunction, and even though the appellee did not defend this basis of the ruling, the Sixth Circuit addressed this portion of the decision in order “to resolve any ambiguity over the type of judicial review that 9 U.S.C. § 2 does and does not permit.” The Court emphatically held that Section 2 does not permit interlocutory review of arbitration proceedings. Thus, the Court explained, “nothing in the text of the FAA suggests that Section 2 was intended to displace the limitation of judicial review in contained in Section 10 of the FAA.” In other words, it refused endorse a theory that would allow Section 2 to prevent a new means for review of arbitration decisions.