In re Wal-Mart Wage and Hour Employment Practices Litigation, ___ F.3d ___ (9th Cir. Dec. 17, 2013), the Ninth Circuit Court of Appeals affirmed the order of the U.S. District Court for the District of Nevada which in turn confirmed an arbitration award allocating attorneys’ fees to the prevailing party. In doing so, the appellate court held that a non-appealability clause in the operative arbitration agreement was not enforceable.
The appeal arose out of a dispute over attorneys’ fees awarded in multidistrict wage and hour litigation against Wal-Mart. In the course of settling that litigation, the attorneys for the class agreed to resolve any dispute over fees they might have among themselves through binding arbitration. On November 20, 2009, the district court finalized the settlement, which awarded plaintiffs approximately $28 million in attorneys’ fees. Because the plaintiffs’ attorneys could not agree on the proper allocation of these fees, they submitted their dispute to arbitration and the arbitrator did the allocation. One of the attorneys then moved to vacate the arbitrator’s award, but this was rejected by the District Court because it found no legal basis for doing so. The resulting appeal was challenged on the ground that the arbitration agreement contained a clause which stated that the arbitrator’s opinion would be final and not subject to review.
The appellate court concluded that such a non-appealability clause (one that eliminates all federal court review of arbitration awards, including review under § 10 of the Federal Arbitration Act), is not enforceable. Permitting parties to contractually eliminate all judicial review of arbitration awards would not only run counter to the text of the Federal Arbitration Act but would also frustrate Congress’ attempt to ensure a minimum level of due process for parties to an arbitration. Nevertheless, the appellate court agreed that the District Court correctly confirmed the award.