AND THEN AGAIN, MAYBE NOT

In a post-dated September 7, 2017, we reviewed a Pennsylvania federal court decision holding the federal court could not enforce an arbitration award reversed by a state appellate court because of a lack of diversity and subject matter jurisdiction.  Patterson v Shelton, 2017 WL 3446885 (ED Penn 2017).  The church split that led to the arbitration award in 2006 and finally to the federal court in 2017 started in 1991.

The story, and the litigation, are not concluded.  In Patterson v Shelton, Slip Op. (PA App, 2017), and apparently in several other proceedings, the Plaintiff challenged the jurisdiction of the courts to reverse the arbitration award.  Finally, the Commonwealth Court of Pennsylvania, an intermediate appellate court, somehow realized the state courts did not have jurisdiction to reverse the arbitration award.  The arbitration contract specifically recited the arbitration would be binding and non-appealable.  Thus, every trial court and appellate ruling after the arbitration award was wiped out and the arbitration award stood as the final decision.  The arbitration award could be reduced to judgment in court and enforced in court.  The opinion does not clearly explain how the prior appellate decision to reverse the arbitration award turned out to be wrong, but recognition of the lack of jurisdiction to reverse the arbitration award was probably the right call.  See, United States Arbitration Act, 9 USC §1, et seq.  Also, Pennsylvania adopted the Uniform Arbitration Act which would require the same result.

Arbitration is a tool like any other in that its best use is in those situations in which a business dispute must be resolved.  In such a dispute it can be very cost effective and very effective.  But, arbitration is typically far more expensive than a court proceeding if the arbitral forum or the arbitrators do not control the proceedings as well as require only modest compensation for their time.  Also, given the high emotions in a church split, like those that fueled more than two decades of litigation in the decision reported above, arbitrators may or may not have sufficient judicial power to govern the proceedings.  Cost-effective arbitration depends on the cooperation of the parties in the discovery process and in emotionally charged cases, like church splits, that cooperation may be in short supply.

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