On December 17, 2013, in a case of first impression for the court, the US Court of Appeals for the Ninth Circuit in In re Wal-Mart Wage & Hour Employment Practices Litigation held that a non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards, including review under Section 10 of the Federal Arbitration Act (FAA), is unenforceable (No. 11-17718, (9th Cir. Dec. 17, 2013)).

The appeal arises out of a dispute over attorneys' fees awarded in the Wal-Mart wage and hour multidistrict litigation in the US District Court for the District of Nevada. In December 2008, the parties to the Wal-Mart Litigation participated in a mediation with Judge Layn Phillips where they agreed to a global settlement in which Wal-Mart would pay up to $85 million to settle all claims against it. The parties also agreed that any fee disputes among the plaintiffs' counsel would be arbitrated by Judge Phillips. The district court preliminarily approved the settlement and later granted final approval. The district court also awarded the plaintiffs approximately $28 million in attorneys' fees.

During the course of the Wal-Mart Litigation, plaintiffs' co-lead counsel, Robert Bonsignore and Carolyn Burton, and liason counsel, Carol LePlant, quarreled over the proper allocation of the $28 million fee award. Consequently, the fee dispute was submitted to an arbitrator for "binding, non-appealable arbitration" under the settlement agreement. In January 2011, the arbitrator handed down an opinion allocating over $6 million to Burton and other counsel (the Burton Group), over $11 million to Bonsignore and over $730,000 to LaPlant. Bonsignore moved to confirm the arbitration award while the Burton Group filed a motion to vacate the award. The district court granted Bonsignore's motion and found no basis for vacating the arbitration award. The Burton Group appealed, and Bonsignore argued that the circuit court lacked jurisdiction to hear the appeal because the parties agreed to binding, non-appealable arbitration.

On appeal, the Ninth Circuit affirmed the district court's confirmation of the arbitration award. The court also rejected Bonsignore's argument that it lacked jurisdiction to review the arbitration award because the parties' settlement agreement contained a non-appealability clause. The Ninth Circuit noted that other courts have construed non-appealability clauses to either:

The Ninth Circuit concluded that the second possible interpretation is unenforceable because it eliminates judicial review under § 10 of the FAA in which a court may vacate, modify or correct an arbitration award. The court reasoned that permitting parties to contractually eliminate all judicial review of arbitration awards would run counter to the text of the FAA and frustrate Congress's attempt to ensure a minimum level of due process for parties to an arbitration.

Parties to an arbitration agreement should be aware that the statutory grounds for vacating an arbitration award under the FAA may not be waived or eliminated by contract.