The opinion of the court was delivered by: Bucklo, District Judge.
MEMORANDUM OPINION AND ORDER
Planitiff Douglas Bargenquast and defendant Nakano Eoods, Inc. ("NFI")
entered into an employment agreement, whereby Mr. Bargenquast was to
serve as Chief Executive Officer and President of NFL. The employment
agreement contained an arbitration clause. A dispute arose regarding Mr.
Bargenquast's subsequent termination, and the dispute was submitted to
arbitration. The arbitrator rendered an award of $418,775 in Mr.
Bargenquast's favor.*fn1 Mr. Bargenquast now tiles motions in this court
to confirm the award pursuant to § 9 of the Federal Arbitration Act
("FAA"), 9 U.S.C. § 1, et seq., to enter judgment on the award, and
for a writ of execution on the judgment pursuant to Fed.R.Civ.P. 69.*fn2
opposes these motions and seeks to vacate the arbitration award under
§ 10 of the FAA. I grant Mr. Bargenquast's motion to confirm the
award, deny NFI's motion to vacate the award, and order NFI to pay Mr.
Bargenquast $418,775 plus interest.
Under § 9, I must grant an order confirming an arbitration award
unless the award is vacated, modified, or corrected under §§ 10 or
11.*fn3 Here, NFI seeks to vacate the award under § 10(a)(4), which
allows a court to vacate the award "[w]here the arbitrators exceeded
their powers." Judicial review of a commercial arbitration award is
"grudgingly narrow." Eljer Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250,
1253 (7th Cir. 1994). Neither errors in the arbitrator's interpretation
of law or findings of fact, nor an insufficiency of evidence supporting
the arbitrator's decision justify reversal of the arbitration award.
Id., at 1254. NFI claims that the arbitrator's decision was not supported
by law or substantial evidence. Under the restrictive standard of review
described in Eljer, such claims, even if true, would not show that the
arbitrator exceeded his normal. powers.
NET argues, however, that the arbitrator's powers were expressly
limited by the arbitration clause, which states that "[t]he arbitrator
. . . shall have no power, in rendering the award, to alter or depart from
any express provision of this Agreement or to make a decision which is
not supported by law and substantial evidence." (Employment Agreement
¶ 10.) Thus, argues NFI, any award not supported by law and
substantial evidence would be made in excess of the power expressly
delegated to the arbitrator by the parties and could therefore be vacated
by a district court under § 10(a)(4). In order to enforce this
contract term, however, I would have to review the arbitration decision
to determine whether it was supported by law and substantial evidence.
This is a far more searching review than the "grudgingly narrow" review
described in Eljer. Whether parties can contractually expand the judicial
standard of review of an arbitration award is the subject of a circuit
The Third, Fifth, and Ninth Circuits have all clearly held that parties
can expand the standard of review. Roadway Package Sys., Inc. v. Kayser,
257 F.3d 287, 293 (3d Cir. 2001) ("We . . . hold that parties may opt out
of the FAA/s off-the-rack vacatur standards and fashion their own.");
Gateway Techs., Inc. v. MCI Telecomms. Corp., 64 F.3d 993, 997 (5th Cir.
1995) ("When, as here, the parties agree contractually to subject an
arbitration award to expanded judicial review, federal arbitration policy
demands that the court conduct its review according to the terms of the
arbitration contract."); LaPine Tech. Corp. v. Kyocera Corp., 130 F.3d 884,
889 (9th Cir. 1997) ("[W]e fully agree with the Fifth Circuit [in Gateway
Technologies]. Federal courts can expand their review of an arbitration
award beyond the FAA'S grounds, when (but only to the extent that) the
parties have so agreed.") Additionally,
the Fourth Circuit, in an
unpublished opinion, has also held that parties can contractually expand
judicial review of an arbitration award. Syncor Int'l Corp. v. McLeland,
No. 96-2261, 1997 WL 452245, at **5-6 (4th Cir. 1997) (citing Gateway
On the other side of the split sits the Tenth Circuit, which has
expressly held that "parties may not contract for expanded judicial
review of arbitration awards." Bowen v. Amoco Pipeline Co., 254 F.3d 925,
937 (10th Cir. 2001) (acknowledging circuit split). In addition, the
Eighth Circuit has, in dicta, expressed concerns that indicate it may
lean towards the view of the Tenth Circuit. See UHC Mgmt. Co. v. Computer
Scis. Corp., 148 F.3d 992, 997 (8th Cir. 1998) ("It is not clear . . .
that parties have any say in how a federal court will review an
arbitration award when Congress has ordained a specific, self-limiting
procedure for how such a review is to occur."). The Seventh Circuit has
not directly addressed the issue.
The circuits allowing parties to contract for a higher standard of
judicial review of arbitration awards rely on the Supreme Court's
decision in Volt Information Sciences, Inc. v. Board of Trustees of
Leland Stanford Junior University, 189 U.S. 468 (1989), which held that
the FAA requires courts to enforce arbitration agreements, "like other
contracts, in accordance with their terms." Id. at 478. The circuits
allowing expanded review read Volt and its progeny to mean that if
parties specify in an arbitration agreement that a heightened standard of
judicial review is to be applied, courts are obliged to enforce that term
of the agreement. See Roadway Package Systems, 257 F.3d at 292-93;
Gateway Techs., 64 F.3d a: 996; LaPine Tech., 130 F.3d at 888. The Tenth
Circuit in Bowen acknowledged the contractual nature of arbitration but
argued that "no authority clearly allows private parties to determine how
federal courts review arbitration awards." 254 F.3d at 934. The court
refused to read Volt as broadly as the other circuits, noting that in
Volt, the Supreme Court allowed enforcement of an agreement by the
parties to apply state rules to their arbitration because doing so "gave
effect to the contractual rights and expectations of the parties without
doing violence to the policies behind . . . the FAA." Id. (quoting Volt,
489 U.S. at 479) (emphasis added by Bowen court). The Tenth Circuit
concluded that while the contractual agreement in Volt did not undermine
FAA policies,*fn4 allowing parties to contract for a heightened standard
of judicial review would undermine FAA policies such as "the independence
of the arbitration process and . . . finality of arbitration awards."
Bowen, 254 F.3d at 935. Additionally, the Tenth Circuit noted that
reviewing an arbitration decision under a contractually designated
standard of review, "the reviewing court would be engaging in work
different from what it would do if it had simply heard the case itself."
Id. at 935-26.
I find the Tenth Circuit's reasoning compelling and agree that parties
may not contractually expand the limited standard of judicial review of
arbitration awards. "Whether to arbitrate, what to arbitrate, how to
arbitrate, and when to arbitrate are matters that parties may specify
contractually. However, [there is] no authority explicitly empowering
litigants to dictate how an Article III court must review an
arbitration decision." LaPine Tech., 130 F.3d at 891 (Mayer, J. dissenting)
(internal citation omitted); see also id. (Kozinski, J. concurring). Absent
such explicit authority from Congress, the Supreme Court, or the Seventh
Circuit, I will. not defer to parties' agreement to alter the
well-established narrow standard of review.*fn5
I also believe the Tenth Circuit approach is likely to be adopted by
the Seventh Circuit. In Chicago Typographical Union No. 16 v. Chicago
Sun-Times, Inc., 935 F.2d 1501 (7th Cir. 1991), Judge Posner, in dicta,
noted that if parties so desire, "they can contract for an appellate
arbitration panel to review the arbitrator's award. But they cannot
contract for judicial review of that award," Id. at 1505 (emphasis in
original). While Chicago Typographical Union was a labor relations case
arising under the Taft-Hartley Act, id. at 1503, the Seventh Circuit has
indicated that the same standard of review applies when a federal court
is asked to set aside an arbitration award "whether the award is made
under the Railway Labor Act, the Taft-Hartley Act, or the United States
[Federal] Arbitration Act." Hill v. Norfolk & W. Ry. Co.,
814 F.2d 1192, 1194-95 (7th Cir. 1987). Further, I think that the Tenth
Circuit's argument that contractually expanded judicial review forces
courts to engage in work different from what they would do if they had
simply heard the case themselves and places them "in the awkward position
of reviewing proceedings conducted under potentially unfamiliar rules and
procedures," Bowen, 254 F.3d at 935-36, has some traction in the Seventh
Circuit. The Seventh Circuit has stated that "[p]arties cannot by
contract require a court to follow procedures unfamiliar to it."
Agfa-Gevaert, A.G. v. A.B. Dick Co., 879 F.2d 1518, 1525 (7th Cir. 1989)
(noting that federal courts have a residuum of authority to refuse to
enforce a choice of law provision in a diversity case, even when the
forum state would enforce it). Thus, because I agree with the Tenth
Circuit's approach in Bowen, and believe that the Seventh Circuit would
too, I hold that parties may not contractually expand the scope of
judicial review of arbitration awards.
In seeking confirmation of the award, Mr. Bargenquast also asks that I
add interest accrued from its date of entry. Illinois law provides
post-judgment interest at a rate of nine percent per annum. 735 ILCS
5/2-1303. This statute applies to arbitration awards. See Cerajewski v.
Kunkle, 674 N.E.2d 57, 61 (Ill.App. Ct. 1996). Interest began accruing on
July 9, 2002 when the award was entered. Interest does not stop accruing
until full, formal tender has been made. Halloran v. Dickerson,
679 N.E.2d 774, 778 (Ill.App. Ct. 1997). Under this statute, interest is
calculated per year, then per calendar month, then per day. Id. at 783.
Daily interest is only calculated for periods less than a full calendar
month. Thus, as of November 9, $12,563.24 (4 months at $3,140.81, not 123
days at $104.69) of interest has accrued. Interest will continue to accrue
until NFI makes full tender of the award and accrued interest.
Mr. Bargenquast also requests an explicit instruction that further
interest will begin to accrue fifteen days after the entry of this
order, pursuant to the Illinois Wage Payment and Collection Act, 820 ...