SW Legal studies in Business

Submission of Issues to Arbitration Is Binding on All Participating Parties
Description Appeals court affirmed that an arbitration award was final and enforceable in a case where a party participated in arbitration but had not signed an arbitration agreement with one of the parties in arbitration. Arbitration is binding on all participants regardless of such agreements.
Topic Alternate Dispute Resolution
Key Words Arbitration; Authority
C A S E   S U M M A R Y
Facts LSS, Torch, and Tengasco had a contract dispute involving all three companies. The contract between Torch and Tengasco contained an arbitration agreement. The dispute went to arbitration. The award went in favor of Torch and required Tengasco to pay LSS. Tengasco filed a motion to vacate the award, contending that the arbitrator exceeded his authority by extending the ruling to include LSS, which was not a party to the contract between Torch and Tengasco. The trial court confirmed the award. Tengasco appealed.

Affirmed. An arbitrator cannot rule on a matter if there was no arbitration agreement in effect and if a party to the award did not participate in the arbitration hearing. While the dispute between Tengasco and LSS was not subject to an arbitration agreement, those parties participated in the arbitration hearing, so the arbitrator did not exceed his authority and Tengasco is bound by the award. "Tengasco voluntarily submitted all of the claims involving Torch to arbitration without ever objecting to the Trial Court or the arbitrator on the basis that no arbitration agreement existed. Once an unfavorable award was made, Tengasco cannot then claim there was no agreement to arbitrate. Litigants are not allowed to submit issues to arbitration without objecting on the basis that no arbitration agreement exists, and then object if an adverse award is handed down. Such a ‘lie and wait' attitude would eviscerate the arbitration process."

Citation Louisiana Safety Systems, Inc. v. Tengasco, Inc., 2001 WL 1105395 (Ct. App., Tenn., 2001)

Back to Alternate Dispute Resolution Listings

©1997-2002  SW Legal Studies in Business. All Rights Reserved.