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Pick up any textbook or treatise on arbitration law, and you’ll find the same thing in the chapter on enforcing arbitral awards: courts cannot conduct a merits review of awards. Courts, in other words, do not second guess the conclusions of the arbitrators about law or facts.
Or at least they’re not supposed to do so.
Still, losing parties often try to convince a reviewing court that the arbitrator “exceeded her powers.” These sorts of excess of authority arguments have become quite common.
That’s exactly the sort of argument at issue in a hot-off-the-presses Tenth Circuit case, MEMC II, LLC v. Cannon Storage Sys., Inc., No. 18-6079, 2019 WL 549633 (10th Cir. Feb. 12, 2019).
In the case, the parties entered into a standard form construction contract, containing an arbitration clause. Cannon was supposed to build a commercial storage facility for MEMC. A dispute arose because Cannon decided that it needed to make some changes to the structural plans. When MEMC discovered this, it refused to continue to pay Cannon. Cannon then initiated arbitration to recover the payments.
MEMC defended by saying that Cannon had committed a material breach. It maintained that, under applicable Texas law, Cannon’s unilateral decision to depart from the specifications constituted a per se material breach discharging it from its duty to pay under the contract. The...
