Sarah Hinkes v. Sunera Technologies, Inc.

Holding: The Seventh Circuit affirmed the district court's confirmation of the arbitration award, holding that the court had subject matter jurisdiction and that the arbitrator did not engage in misconduct under the Federal Arbitration Act.
Standard: Federal Arbitration Act Section ten(a)(3) misconduct standard
Vote: Panel decision affirming the lower court.
Practical effect: The decision reinforces the limited scope of judicial review over arbitration awards and clarifies that subject matter jurisdiction for confirmation actions follows the jurisdiction of the underlying dispute.

The Seventh Circuit affirmed a district court order confirming an arbitration award in an employment discrimination case. The court held that the district court had subject matter jurisdiction and that the arbitrator did not commit misconduct by admitting evidence the appellant characterized as hearsay.

Background

Sarah Hinkes sued her employer and two employees for discrimination under federal statutes. The suit was stayed in favor of arbitration. After an arbitrator ruled in the employer’s favor, Hinkes asked the district court to set aside the award. The district court instead confirmed the award, and Hinkes appealed.

The court’s reasoning

The court first addressed subject matter jurisdiction, ruling that the district court had jurisdiction to confirm the award because the original suit arose under federal law. The court then rejected Hinkes’s arguments that the arbitrator committed misconduct under Section ten of the Federal Arbitration Act. The court explained that the Federal Rules of Evidence do not apply in arbitration and that Section ten does not authorize setting aside an award for admitting excess or unreliable evidence. The court noted that the statements in question were not admitted for their truth and that Hinkes failed to show prejudice.

Federal judges should not set aside awards for reasons of their own devising, rather than those specified by Congress.

Hall Street Associates, L.L.C. v. MaLel, Inc., 552 U.S. 576, 583–89 (2008)

What it means going forward

The decision reinforces the limited scope of judicial review over arbitration awards and clarifies that subject matter jurisdiction for confirmation actions follows the jurisdiction of the underlying dispute.