WisBar News: Arbitration Rulings Not Reviewable in Circuit Court Until Final Award Rendered, Appeals Court Rules:

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  • WisBar News
    March
    14
    2012

    Arbitration Rulings Not Reviewable in Circuit Court Until Final Award Rendered, Appeals Court Rules

    Joe Forward
    Legal Writer

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    In a case of first impression, a state appeals court recently ruled that circuit courts can't review intermediate arbitration rulings until an arbitration panel has made a final award.

    Arbitration rulings not reviewable in 
circuit court until final 
award renderedMarch 14, 2012 – In a case of first impression, a state appeals court recently ruled that circuit courts can’t review intermediate arbitration rulings until a panel has made a final award.

    The appeals court also clarified that arbitration panels, not circuit courts, have exclusive authority to interpret arbitration agreements with respect to procedural issues.

    After an auto accident, plaintiffs Mary and Leslie Marlowe agreed to arbitrate an uninsured motorist claim with their insurer, IDS Property Casualty Insurance Company.

    IDS requested discovery in the form of depositions, medical records, and independent medical exams. But the Marlowes did not comply with the request, arguing that discovery in arbitration is limited to depositions under Wisconsin’s Arbitration Act, specifically Wis. Stat. section 788.07.

    The arbitration agreement stated that “local rules of law as to procedure and evidence will apply” in arbitration. IDS argued that this provision meant full discovery was permitted, that is, discovery to the extent permitted by ch. 804 governing discovery in civil litigation.

    On IDS’s motion, the arbitration panel decided the discovery issue in favor of IDS, ruling the arbitration agreement allowed discovery under the state’s civil rules of procedure.

    The Marlowes then filed a declaratory action in circuit court, which ruled that the arbitration panel’s discovery ruling was incorrect – only depositions were discoverable.

    On appeal, IDS argued that the circuit court did not have authority to rule on that issue because the arbitration panel had not rendered a final award. In Marlowe v. IDS Property Casualty Ins. Co., 2011AP2067 (March 13, 2012), the District II appeals court agreed with IDS.

    The court reviewed several federal cases interpreting provisions in the Federal Arbitration Act to hold that arbitration rulings are generally not immediately reviewable.

    “If every individual decision of an arbitration panel were separately and independently reviewable by a circuit court, the advantages of arbitration would become meaningless, as both litigation costs and delay would increase significantly,” wrote Judge Gregory Peterson.

    However, the appeals court left open the possibility that interlocutory review of arbitration panel rulings may be appropriate in exceptional circumstances to prevent manifest injustice, to preserve assets, or where the arbitration panel’s ruling does not involve a procedural issue.

    Exclusive authority when parties agree

    The appeals court also clarified that the circuit court did not have authority to substitute its interpretation of the arbitration agreement for that of the arbitration panel, distinguishing Borst v. Allstate Ins. Co., 2006 WI 70, 291 Wis. 2d 361, 717 N.W.2d 42.

    In that case, Allstate insurance wanted full discovery and got it. After an arbitration panel rendered its award, appellant Borst challenged the panel’s decision, arguing that discovery should have been limited to depositions only under Wis. Stat. section 788.07.

    Ultimately, the Wisconsin Supreme Court in Borst ruled that the arbitration panel did not have authority to order additional discovery beyond depositions, because the arbitration agreement was silent regarding the scope of discovery. In Marlowe, the agreement was not silent.

    Borst illustrates that, while an arbitrator lacks inherent power to order additional discovery beyond the taking of depositions, parties to an arbitration agreement are free to draft the agreement to allow for a broader range of discovery,” Judge Peterson explained.

    In stating that the “local rules of law as to procedure and evidence will apply” in arbitration, the parties arguably agreed on the scope of discovery, the appeals court explained. Thus, the arbitration panel had exclusive authority to interpret the scope of discovery issue.