District Court confirms arbitral panel's order granting injunctive relief | Practical Law

District Court confirms arbitral panel's order granting injunctive relief | Practical Law

Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Leah Witters (Associate), White & Case LLP

District Court confirms arbitral panel's order granting injunctive relief

Practical Law Legal Update 5-510-7630 (Approx. 2 pages)

District Court confirms arbitral panel's order granting injunctive relief

Published on 03 Nov 2011International, USA (National/Federal)
Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Leah Witters (Associate), White & Case LLP
The United States District Court for the Eastern District of Missouri granted a party’s motion to confirm an arbitral award where the arbitral panel issued injunctive relief, because the court found that the arbitral panel’s order was a final order that could be confirmed.
In Ferry Holding Corp. v Williams, No. 4:11 MC 527 RWS, (E.D. Mo. Oct. 24, 2011), Ferry Holding and Stephen Williams entered into an operating agreement as part of Williams selling his majority stake in a company to Ferry Holding. The agreement contained an arbitration clause and, after Ferry Holding alleged that Williams breached the operating agreement, the parties began arbitrating their dispute.
During the arbitral proceeding, Ferry Holding moved for injunctive relief, and the arbitral panel granted the relief in an order. The order stated that the injunction "shall remain in effect until the Panel issues its decision on the merits in this proceeding, unless earlier modified following motion by a party." Ferry Holding filed a motion to confirm an arbitration award, asking the court to confirm the injunctive relief. Williams opposed the motion to confirm, arguing that the arbitral panel's order was not a final order and thus could not be confirmed by the court.
The court explained that the parties could not find binding precedent that governed this particular issue, but both parties agreed that an arbitration award has to be "final and definite" to be confirmed. The parties also agreed that courts have previously found that they could confirm as final orders, arbitral orders that provided for temporary, equitable relief.
The court cited Sixth Circuit Court of Appeals precedent, explaining that "an arbitration award that 'disposes of one self-contained issue, namely whether [a party] is required to perform the contract during the pendency of the arbitration proceeds' can be confirmed as a 'separate, discrete, independent, severable issue.'" The court then found that the arbitral panel's order, in this case, involved the kind of severable issue that the court could confirm as final.
The court further explained that arbitral panels must be able to issue temporary and equitable relief. If this relief is going to be effective, courts must be able to confirm and enforce the arbitral panel's orders as final orders.
This case demonstrates the willingness of courts to ensure that arbitration is effective by giving deference to arbitral awards and orders, even when they are not the arbitral tribunal's final award, so as to promote the federal judicial policy favouring arbitration.