On February 4, an arbitration panel ordered Lance Armstrong to pay $10 million to his former promotions company, SCA, as a result of his “unparalleled pageant of international perjury, fraud and conspiracy” that covered up his use of performance-enhancing drugs. (Read the NYT story about it here.) What is curious about the award, from an arbitration law standpoint, is that SCA essentially re-opened an arbitration that it had lost with Armstrong in 2005 to obtain this new award.
The general rule of thumb is that arbitrators lose jurisdiction once they issue the final award. Other than the short period within which parties may request that arbitrators correct a clerical or computational error under the arbitral rules (AAA gives 20 days; JAMS gives only 7), the arbitrators turn into pumpkins for all practical purposes after the final award is issued. The arbitral rules do not have any equivalent to Rule 60, which in state and federal courts allows a judge to re-do a judgment or order based on newly discovered evidence, fraud, or mistake. (But even Rule 60 sets a deadline of one year after the judgment is entered to request that the judgment be vacated…)
There is even a fancy Latin name for the reason that arbitrators turn into pumpkins after they issue final awards: functus officio. The policy is that arbitration awards are suppoed to bring finality, and we wouldn’t want arbitrators revisiting awards based on improper or ex parte information. However, one of my favorite arbitration resources, Domke on Arbitration, suggests that there are now so many exceptions to the functus officio doctrine that they just about swallow the rule. Courts have allowed arbitrators to revisit their awards to correct mistakes, to rule on an issue that was submitted but not decided, to clarify an ambiguity, and always, if the parties contractually authorize the same panel to hear a new issue.
That last exception explains how the SCA got a second bite at its arbitration with Armstrong. SCA’s petition to confirm the new arbitration award gives some important additional facts about what happened at the 2005 arbitration. Before the arbitration concluded, SCA and Armstrong entered into a settlement agreement requiring SCA to pay Armstrong $7.5 Million. That settlement agreement specified that the same panel of three arbitrators who heard the 2005 evidence would have “exclusive jurisdiction over” “any dispute or controversy [between the parties] arising under or in connection with” the settlement agreement.
After Armstrong admitted to Oprah Winfrey that he lied in his arbitration with SCA, SCA pursued two new claims with the three original arbitrators: sanctions for perjury and forfeiture of prize money that SCA had paid to Armstrong. Armstrong objected that the initial panel lacked authority to reconvene, but a majority of the panel disagreed. After hearing the evidence, a majority of the panel awarded SCA $10 million in sanctions against Armstrong.
Is there any lesson in this highly unusual tale for the run-of-the-mill arbitration? Of course. In general, parties and their advocates have one shot at getting the right result in arbitration, so every effort should be made to uncover important evidence and submit it to the panel. But, in the circumstance where one party is convinced that material evidence remains hidden, why not find a way to make sure the same arbitrator(s) could hear that evidence in the future? The settlement agreement between Armstrong and SCA is a good vehicle for that.
By Liz Kramer