Tempo Shain Corp. v. Bertek, Inc. - 120 F.3d 16 (2d Cir. 1997)

Rule:

Courts interpret 9 U.S.C.S. § 10(a)(3) to mean that except where fundamental fairness is violated, arbitration determinations will not be opened up to evidentiary review. In making evidentiary determinations, an arbitrator need not follow all the niceties observed by the federal courts. However, although not required to hear all the evidence proffered by a party, an arbitrator must give each of the parties to the dispute an adequate opportunity to present its evidence and argument. Federal courts do not superintend arbitration proceedings. A court's review is restricted to determining whether the procedure was fundamentally unfair.

Facts:

Appellee corporations entered into a contract with appellant corporation for the manufacture of repellency enhanced material that appellees were going to sell to the apparel and footwear industries. Disagreements arose and appellees filed claims of fraudulent inducement to contract and breach of contract. Appellant counterclaimed with the same charges. The parties entered into arbitration but appellant's former president was unable to testify. The arbitrators concluded that he had no new information to add and entered an award for appellees. The trial court confirmed the award.

Issue:

Did the panel’s refusal to continue the hearings to allow the witness to testify amount to fundamental unfairness and misconduct sufficient to vacate the arbitration award? 

Answer:

Yes.

Conclusion:

On review, the court found that there was no reasonable basis for the arbitration panel to decide that the witness's omitted testimony would be cumulative on appellant's fraudulent inducement claim and in rebuttal of appellees' claim, especially as he was the only individual involved in the negotiation of the contract with appellees for appellant. The court concluded the arbitrators' refusal to continue the hearings to allow the witness to testify amounted to a fundamental unfairness and misconduct sufficient to vacate the award under Federal Arbitration Act, 9 U.S.C.S. § 10(a)(3) and remanded the action.