Doral Fin. Corp. v. Garcia-Velez, 725 F.3d 27 (1st Cir. 2013) [click for opinion]

Defendant commenced arbitration against his employer, a bank, for denying him severance pay after firing him.  The bank argued that Defendant was not owed severance pay because he was terminated “for cause” and because he breached the non-compete clause in his employment contract by joining a competitor bank.  At the start of the arbitration proceedings, the parties agreed to a scheduling order regarding requests for information.  The bank nonetheless filed a request for third-party subpoenas outside of the agreed-upon timeframe. 

The arbitration tribunal denied the subpoenas, and the bank filed another request for subpoenas and asked the tribunal to reconsider in light of newly discovered facts its denial of the bank's earlier subpoenas.  The tribunal denied both requests, finding that the bank was aware of these facts prior to the expiration of the time period to request such information.  After hearing arguments and evidence, the tribunal determined that Defendant was entitled to compensation and pre-award interest because his termination was not for cause and he did not breach the non-compete clause. 

The bank sued in federal district court to vacate the award.  It argued that the tribunal improperly refused to issue the subpoenas and exceeded its authority under the employment agreement by awarding pre-award interest.  The district court denied the request.  The bank appealed, arguing that it did not receive a fair hearing before the tribunal as required under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10(a)(3).  The First Circuit affirmed.

The court noted that, given the importance of honoring the parties' decision to have disputes settled by an arbitrator, an arbitrator's award is subject to extremely narrow and exceedingly deferential review and is nearly impervious to judicial oversight.  Still, the court made clear that such review does not give an arbitrator limitless power; a court must vacate an award when, as stated in § 10(a)(3), a party is deprived of a fair hearing because the arbitrator refused to hear evidence relevant to the controversy. 

The court considered whether the  party received adequate notice and an opportunity to present relevant evidence and arguments.  The bank did not dispute it received adequate notice; it had, after all, agreed to the scheduling order for requesting information, which would have included the subpoenas.  The court also found that the bank had ample opportunities to present arguments and relevant evidence: within the timeframe provided by the scheduling order; in the bank's fillings of pre-hearing and hearing subpoenas and its motion to reconsider the pre-hearing subpoenas order; when it cross-examined Defendant and introduced its own evidence; and when it filed a post-hearing memorandum and proposed award.  The court found no evidence that the tribunal engaged in misconduct.