A recent federal case in New York cautions against failing to pay arbitration awards if the party wishes to keep an arbitration decision out of the public eye.
What is Private Arbitration?
One of the benefits of private arbitration is the ability to keep disputes private among parties and away from general public access. When parties file a lawsuit in court, the lawsuit and all documents in the lawsuit become public. The lawsuit can be picked up by news organizations or even other potential litigants who want to use the lawsuit to learn about how a company handles its legal disputes. This can have a dramatic effect on how the public views the parties in any dispute, even after settlement.
When an arbitrator makes a binding arbitration award, the losing party may attempt to ignore the decision or negotiate with the prevailing party. If the parties do not voluntarily follow the arbitration award, then the prevailing party must file a petition with a court to enforce the judgment. Included in the petition is the award and likely other details that were decided in the arbitration. To avoid the publicity that could result with the arbitrator’s award being public, parties have often filed motions to seal filed redacted versions of the arbitration award.
Bristol-Myers Squibb Co., v. Novartis Pharma AG
According to a recent case in the U.S. District Court for the Southern District of New York, captioned Bristol-Myers Squibb Co., v. Novartis Pharma AG, filing the final arbitration award can effectively waive the private arbitration benefit of keeping the dispute out of the public eye. In the case, Bristol-Myers Squibb Company filed a petition to confirm an arbitration award in its favor and against Novartis Pharma AG. Novartis Pharma AG responded by filing a motion to seal the final arbitration award in its entirety or, alternatively, to file a heavily redacted version. The motion to seal would have effectively hidden from the public the dispute between the parties and that Novartis Pharma AG lost in the arbitration. Bristol-Myers Squibb Co., understandably, did not oppose the motion to seal. The court denied Novartis’s motion.
In the court’s order denying the motion to seal the arbitration award, the court discussed that the public has a well-established First Amendment right to documents filed in courts. The court agreed with Novartis Pharma AG that arbitration is purely private, and does not give the public any right of access. However, the court reasoned that once a petition to enforce arbitration was filed, the petition and the award documents from the arbitration became judicial documents subject to the right of public access. The court further reasoned that by filing in court, parties do not have a legitimate expectation of privacy because they should know there is a strong presumption of public access for judicial proceedings.
Failure to Voluntarily Comply With the Arbitration Award Voids Expectation of Privacy
If Novartis wanted to keep the dispute and award against it out of the public’s eye, it could have voluntarily complied with the arbitration award. By not doing so, it opened the door for Bristol Myers Squibb Co. to petition the court to enforce the arbitration decision and for any publicity that might occur with the arbitration award becoming a public document.
With the Southern District of New York Court’s order in mind, parties who prevail and those who lose in arbitration should be aware that anything from an arbitration proceeding filed in a public court can open the door to the public learning about the dispute among the parties.
For further questions or clarifications on arbitration or any other commercial litigation matter, please contact Jeffrey R. Vaisa at (JRV@kjk.com; 216.736.7287) or an attorney in KJK’s Litigation & Arbitration practice group.