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December 23, 2002


The opinion of the court was delivered by: Bucklo, District Judge.


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 NFI 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.

I. Standard of Review

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 split.

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 Technologies).

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.

As a result, I review the award here under the "grudgingly narrow" standard of Eljer. NFI seeks to vacate the award on the ground that the arbitrator's award was not supported by law or substantial evidence. Under Eljer, however, neither mistakes of law nor an insufficiency of evidence permit me to disturb an arbitrator's award. 14 F.3d at 1253-54. As a result, I may not vacate the award under § 10 of the FAA, and instead must confirm it under § 9.

II. Interest

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 ...

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