Bain Cotton Co. v. Chestnutt Cotton Co., No. 12-11138 (5th Cir. June 24, 2013) [click for opinion]
Bain Cotton Company (“Bain”) appealed the district court’s denial of Bain’s motions to vacate an arbitration award, reopen the case, and allow discovery. Bain claimed misconduct on the part of the arbitrators because they “first ignored Bain’s repeated requests for discovery, and then summarily condemned Bain for failing to provide proof supporting its claims—proof that was out of Bain’s control and that the [arbitrators] refused to discover.”
The Fifth Circuit affirmed the district court's denial of Bain's motion to reopen the case, vacate the arbitration award, and obtain additional discovery. The court observed that the case presented "a quintessential example of a principal distinction between arbitration and litigation, especially in the scope of review." The court recognized that it was not unlikely that the denial of Bain’s discovery requests would have led to reversal had the discovery dispute arisen in and been ruled on by the district court, rather than by arbitrators. Nevertheless, the court was constrained by the extremely narrow and limited grounds on which a court may reverse an arbitration award under the Federal Arbitration Act ("FAA"):
Under § 10 of the FAA, an arbitration award may be vacated only if the reviewing court finds that the award was procured by corruption, fraud, or undue means; that there was evident partiality or corruption in the arbitrators; that the arbitrators were guilty of misconduct in refusing to postpone the hearing on sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or any other misbehavior by which the rights of any party are prejudiced, or the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
The court held that, even if it might disagree with the arbitrators' handling of Bain's discovery requests, that handling did not rise to the level required for vacating the award under any of the FAA's narrow and exclusive grounds.