Appeals Related to the Arbitration Process

It is a common occurrence for contracts to contain a provision requiring the parties to submit to binding arbitration in lieu of litigation through the court system.  The enforceability of such a provision is often the subject of its own litigation.  Many times, parties do not wish to arbitrate a dispute because they believe they would achieve a more favorable result through the court system.  If the parties are ordered to submit to arbitration, both parties may not be satisfied with the arbitration award.  This post aims to provide guidance for what recourse an unsatisfied party may have upon receiving an unfavorable order denying or compelling arbitration or an unfavorable arbitration award. 

Appeals of Orders Denying or Compelling Arbitration 

To determine if the parties must submit to arbitration with regard to a particular dispute, the court will identify (1) whether the arbitration agreement itself is valid and (2) whether the specific dispute falls within the scope of that agreement.  Raspet v. Buck, 147 N.C. App. 133, 136, 554 S.E.2d 288 (1999).  Upon completion of the above analysis, the court will make a ruling as to whether the parties are to submit to arbitration.  Whether this ruling can be immediately appealed depends on the ruling itself.  An order denying arbitration is immediately appealable.  Pineville Forest Homeowners Ass’n v. Portrait Homes Const. Co., 175 N.C. App. 380, 623 S.E.2d 620 (2006).  The North Carolina Court of Appeals held in Howard v. Oakwood Homes Corp. that “the right to arbitrate a claim is a substantial right which may be lost if review is delayed . . . .”  134 N.C. App. 116, 118, 516 S.E.2d 879, 881 (1999).  Therefore, an order granting a motion to stay arbitration is also immediately appealable.  N.C. Gen. Stat. § 1-569.28.  Notably, the question of whether a dispute is subject to arbitration is a question of law reviewable de novo.  Raspet, 147 N.C. App. at 136, 554 S.E.2d at 678.  The North Carolina Court of Appeals held in Ellis-Don Constr., Inc. v. HNTB Corp. that orders denying arbitration must specifically address the two-pronged test set forth in Raspet.  169 N.C. App. 630, 635, 610 S.E.2d 293, 296 (2005). 

On the other hand, orders compelling arbitration and orders reserving a decision whether to compel arbitration are not immediately appealable.  Laws v. Horizon Hous., Inc., 137 N.C. App. 770, 529 S.E.2d 695 (2000); McCrary v. Byrd, 136 N.C. App. 487, 524 S.E.2d 817 (2000).  With regard to orders compelling arbitration, the parties may not appeal until one of the narrow grounds set forth in N.C. Gen. Stat. § 1-569.28(a) is satisfied.  This will likely require the parties to wait until an arbitration award has been entered.  The relevant grounds for such an appeal include (1) an order confirming or denying confirmation of an award, (2) an order modifying or correcting an award, (3) an order vacating an award without directing a rehearing, or (4) a final judgment entered.  Notably, the North Carolina Court of Appeals in Stokes v. Crumpton, held that an immediate appeal of an interlocutory order may be justified under N.C. Gen. Stat. § 7A-27 notwithstanding that no right to appeal lies under the arbitration statute itself.  369 N.C. 713, 719, 800 S.E.2d 41, 45 (2017).  An interlocutory appeal under N.C. Gen. Stat. § 7A-27 may be had if the interlocutory order affects a substantial right.  Stokes, 369 N.C. at 719, 800 S.E.2d at 45.  However, North Carolina courts have consistently held that orders compelling arbitration do not deprive parties of a substantial right.  See Bluffs, Inc. v. Wysocki, 68 N.C. App. 284, 285 S.E.2d 291, 293 (1984).  Ultimately, an appeal of an order compelling arbitration will likely have to wait until the arbitration award has been entered, vacated, or modified.  

Appeals of Arbitration Awards 

If the parties voluntarily submit to arbitration or if there are no grounds to challenge an order compelling the same, the parties’ only recourse is to challenge the arbitration award itself.  Upon motion to the court by a party to an arbitration proceeding, the trial court may vacate an award made in an arbitration proceeding on narrow grounds including awards reflecting mathematical errors, errors relating to form, and errors resulting from arbitrators exceeding their authority.  N.C. Gen. Stat. § 1-569.23.  Generally, parties who have agreed to abide by an arbitrator’s decision will not be heard to attack the regularity or fairness of an award.  FCR Greensboro, Inc. v. C & M Invest., 119 N.C. App. 575, 459 S.E.2d 292 (1995).  Judicial review at the appellate level is limited to determining whether there exists one of the grounds for vacating or modifying the award under the Uniform Arbitration Act.  Notably, a mistake of law or fact will likely not be sufficient to invalidate an arbitration award.  Carolina VA Fashion Exhibitors Inc. v. Gunter, 41 N.C. App. 407, 255 S.E.2d 414 (1979).  The Court of Appeals in Carolina VA Fashion Exhibitors went so far as to say that “[i]f an arbitrator makes a mistake, either as to law or fact, it is a misfortune of the party, and there is no help for it.”  Id. at 415, 255 S.E.2d at 420.  Therefore, an appeal of an order compelling arbitration likely has a greater chance of success as opposed to an appeal of the arbitration award itself.