Summary
The Seventh Circuit affirmed the confirmation of an arbitration award in favor of Sunera Technologies in Sarah Hinkes’s employment-discrimination suit. The court held that federal-question jurisdiction supported confirmation despite a lack of complete diversity and concluded that the arbitrator’s consideration of undisclosed evidence and hearsay did not constitute misconduct under 9 U.S.C. § 10(a)(3).
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Practice areas
Questions Presented
- Whether the federal district court had subject-matter jurisdiction to confirm or set aside an arbitration award in a case originally arising under federal discrimination statutes despite the absence of complete diversity.
- Whether 9 U.S.C. § 10(a)(3) authorized vacatur because the arbitrator admitted evidence not disclosed during discovery or evidence Hinkes characterized as hearsay.
- Whether the arbitrator committed qualifying misconduct by allegedly excluding some of Hinkes's evidence or by permitting procedural departures from the agreed arbitration procedures.
Holdings
- When a federal-question action is stayed in favor of arbitration, the jurisdictional basis underlying the original action continues to support the court's authority to confirm or set aside the resulting arbitration award.
- Section 10(a)(3) does not authorize vacatur merely because an arbitrator admitted allegedly excessive, undisclosed, or unreliable evidence; the subsection addresses refusal to hear pertinent and material evidence and specified misconduct that prejudices a party.
- The asserted evidentiary and procedural irregularities did not amount to misconduct or misbehavior under § 10(a), particularly where Hinkes failed to show prejudice and the challenged evidence apparently did not materially affect the arbitrator's decision.
Key quotations
“The Federal Rules of Evidence do not apply in arbitration, so the elaborate rules defining hearsay and creating exceptions (see Rules 801 to 807) do not govern.” (at 3)
“Federal judges should not set aside awards for reasons of their own devising, rather than those specified by Congress.” (at 5)
Factual background
Hinkes's federal discrimination claims against Sunera and two employees were arbitrated after the district court stayed the action. The arbitrator ruled for Sunera, relying in part on statements attributed to an Oracle employee that were relayed through disclosed witnesses, as well as documents Hinkes claimed had not been disclosed before the hearing. Hinkes argued that the arbitrator improperly admitted undisclosed evidence and hearsay, but the court found no refusal to hear her evidence, no qualifying misconduct, and no demonstrated prejudice.
Procedural history
Hinkes sued her employer and two employees under federal discrimination statutes. The district court stayed the action pending arbitration; after the arbitrator ruled for the employer, Hinkes sought to vacate the award, but the district court confirmed it. On appeal, the Seventh Circuit ordered supplemental briefing on subject-matter jurisdiction and ultimately affirmed.