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Second Circuit Court Reverses Vacatur of Arbitrator’s Award in Sotheby Realty Dispute

Thursday, January, 29, 2015

In an ongoing and complicated case, a Second Circuit Court judge reversed a prior order to vacate an arbitrator’s award in favor of Relocation Group, LLC. The dispute between Relocation Group and Sotheby Realty concerned the commission split from the sale of a property both firms represented. The sale price was ultimately $16 million. Relocation Group claimed it was not paid the proper commission, and sued Sotheby. An arbitration panel awarded Relocation Group the full amount it sought. As it was not required to do so, the arbitration panel did not offer any reasons for its decision.


Sotheby sued to have the award vacated, and a federal court agreed, finding that the arbitrator had disregarded the law because the commission was precluded by Connecticut law, and arbitration awards cannot violate existing laws.


However, under further appeal, the second circuit court strongly disagreed and re-instated the full award. While the second circuit court agrees that disregard for the law is a basis for vacating an arbitration decision, it found the federal court did not properly apply the test to the facts of the case.


This continues a trend in the courts of upholding arbitration decisions despite robust challenges, showing a clear prejudice in favor of arbitration panels. While the court upheld the reasoning behind the challenge, it also moved the bar for proving that basis up higher, making it much more difficult to challenge these rulings in the future.