In its March 18, 2013 opinion in Johnson Controls, Inc. v. Edman Controls, Inc., the US Court of Appeals for the Seventh Circuit refused to vacate an arbitration award against the appellant. The court admonished the appellant for seeking to vacate the arbitration award. In addition, the court warned that challenges to commercial arbitral awards come with a "high risk of sanctions."

The arbitration at issue arose out of a 2007 agreement between the parties under which the appellee Edman Controls had exclusive rights to distribute the appellant Johnson Controls' products in Panama. In 2010, Edman initiated arbitration proceedings against Johnson because Johnson breached the agreement by directly distributing its products in Panama. After the arbitrator awarded Edman more than US$730,000 for damages and expenses, Johnson moved in district court to vacate the award. The district court upheld the arbitration award and granted Edman's motion to confirm it. The district court also awarded Edman fees and costs, consistent with the parties' fee-shifting provision in the 2007 agreement.

Noting that arbitration awards are upheld as long as the arbitrator acted within the scope of his authority, the Seventh Circuit affirmed the district court's decision. Courts will uphold arbitration awards even if the arbitrator made an incorrect decision or committed serious error. The court of appeals also upheld the attorney's fee award imposed by the district court as it was consistent with the 2007 agreement.

The court of appeals suggested that Johnson's appeal was frivolous and that it would have imposed sanctions against Johnson under Federal Rule of Appellate Procedure (FRAP) 38 if Edman had to bear the costs of the appeal (which it did not, under the fee-shifting agreement). The court averred that appeals of arbitration awards "undermine the integrity of the arbitral process" and warned that challenges to commercial arbitration awards "bear a high risk of sanctions."

When a party does not want to accept an arbitration award, counsel should advise the client that it may risk high sanctions if the arbitrator acted within its powers, even if its ruling was incorrect or the arbitrator committed serious error. Because the purpose of arbitration is frustrated by the delay inherent in appellate review of awards, courts may impose sanctions to deter appeals they deem frivolous.