Articles
Confirming Arbitration Awards in State Courts
October 17, 2008
The Scenario: Your client has successfully won an arbitration award in their favor, but has not been able to collect a penny on this award. You now face the challenge to put more teeth into this arbitration award . The Federal Arbitration Act (FAA) would seem to make this a simple task of confirming the award as a judgment in state court. Firsthand experience has shown, however, that difficulties often exist in convincing state courts to cooperate.
Under the FAA, 9 U.S.C. § 9 provides a straightforward process, permitting confirmation of an award upon a timely motion to do so. Upon the obligated parties failure to timely pay what has been awarded, the first step is to bring a motion to confirm the arbitration award. It can be filed in the appropriate trial court of your state.
Defenses to such a motion to confirm are few, limited to a timely motion to vacate, modify or correct the original arbitration award. If the obligated party fails in this step, the state court’s only option under the FAA is to confirm the arbitration award into a judgment. Once the arbitration award becomes a judgment, it allows the additional leverage to collect of placing a lien on the other party’s property.
In my experiences with these motions in North Carolina state courts, however, I have encountered significant resistance from the bench. Most recently, such a motion to confirm gave rise to the opportunity to write an Appellee’s brief on this issue.
A skeptical Superior Court judge somewhat reluctantly granted our Plaintiff’s Motion to Confirm. Unfortunately, the defendant appealed the decision to the North Carolina Court of Appeals, arguing that the Superior Court erred by entering judgment when there were issues of facts remaining, as well as by failing to dismiss Plaintiff’s action to confirm the award.
The defendant’s main argument was predicated on state law rather than the Federal Arbitration Act. The Court of Appeals confirmed, however, that the FAA applies because: 1) the underlying credit card agreement stated that the FAA would apply; and 2) the FAA is clear that it applies to interstate commerce activities, which was the case in this matter. The North Carolina Court of Appeals held that a Superior Court judge must confirm the arbitration award into judgment pursuant to the FAA, unless the Defendant has made a timely motion to vacate, modify or correct.
This ruling will hopefully ease obstacles to future collection efforts on arbitration award rulings, removing any doubt by state court judges’ as to the appropriateness of confirming these arbitration awards into judgment. The decision may be viewed by referencing Advantage Assets, Inc. II, Assignee of MBNA America Bank vs. Tommy A. Howell, No. COA07-878, 2008 N.C. App. LEXIS 812 (May 6,2008).
