An influential appellate court has ruled that compliance with an arbitral award is no bar to confirmation. In so doing, it has upended 200 years of traditional American jurisprudence.

American courts are not debating societies. They exist for resolution of a "case or controversy" and if there is no controversy, then a dismissal of the suit is mandated. On July 14, New York's influential Appellate Division, First Department ruled that in cases of confirmation of an arbitral award, "the parties' dispute over compliance is itself academic."

After an arbitrator renders an award, a party may move to "confirm" the award in court. The procedure in New York is the same as that for filing a lawsuit: a pleading is filed and served, and a fee of $210 is paid to have an Index Number issued, and another $95 paid to have the case assigned to a Judge. The case file is available for public review at the courthouse, and the courts are moving towards a system of electronic filing which will make it possible to review the file for free on the Internet.

In Re Bernstein Family Limited Partnership v. Sovereign Partners LP involved an action under New York statute (CPLR 7510) to confirm an arbitral award. The parties argued over whether the losing side had complied with the arbitral award.

If the award was fully complied with, there would be no "case or controversy" and hence no reason to have the matter before a court in the first place. But the Appellate Division in a unanimous decision held that it did not matter whether there was any dispute among the parties:

[I]t is irrelevant in a proceeding to confirm an award whether there is a dispute about whether the award has been fully satisfied. If there is no such dispute, the court simply confirms the award. If there is such a dispute, the court ignores it and simply confirms the award. In either case, assuming of course that the respondent is not seeking to vacate or modify the award, the court is not exercising the quintessentially judicial power to resolve disputes. Rather, it is excercising a ministerial function at the behest of the Legislature.

The ruling illustrates the deference with which the courts treat arbitral awards--this is the single instance in which a Judge will make a ruling even where there is no case or controversy, and do so without any investigation into any arbitral disregard of procedural or substantive law (in NY, an arbitrator does not have to comply with procedural or substantive law, and even "manifest disregard" is not grounds for vacatur).

It also negates one of the benefits of arbitration, in that even compliance with an arbitratal award will not prevent the matter from becoming public record. Moreover, for those not familiar with the legal standards (or more accurately, the lack thereof) in an arbitration the "ministerial" confirmation of an award can lead to members of the public believing that a judge has ruled against the losing party.

On the flip side, either party now has an absolute right to purchase an Index Number and place documents in the public record, effectively giving parties an opportunity to air their laundry in public for all the world to see.