Is your unfavorable arbitration award confidential? Probably, but only if you don't contest it. There has been a recent trend by members of the plaintiffs' bar to use the Federal Arbitration Act's confirmation process to end-run arbitral confidentiality clauses. The trick works like this - immediately upon receipt of the award, the prevailing party seeks confirmation, files the confidential award under seal as an attachment to the confirmation motion, and then argues to the court that the award should be unsealed (thus breaking the award's confidentiality) because the contents of a court's docket are presumptively public. This approach has gained traction in recent years, particularly in the Southern District of New York, even where the unsuccessful party paid the award in full.
In Stafford v. International Business Machines Corporation, 78 F. 4th 62 (2nd Cir. 2023), the Second Circuit Court of Appeals put a limit on this practice, holding that the public's interest in arbitral confidentiality outweighs its interest in an arbitration award's contents where (a) the award is fully satisfied, and (b) the confirming party seeks to evade contractual confidentiality obligations. This is good news for arbitration parties who wish to keep unfavorable awards private, but it is not a panacea. Stafford's approach strongly suggests that a party who contests an award, either by seeking to vacate it or otherwise refusing to comply with its terms, may not keep the award confidential once the court acts on a confirmation request.
So unsuccessful arbitration parties should be wary - they must choose between contesting an unfavorable award or keeping it confidential. They likely cannot do both.
Here, Stafford continued to seek confirmation and unsealing of her arbitration award even after it had been fully satisfied. Her stated purpose—as argued to the district court and to us—was to enable her counsel to use the award in the litigation of ADEA claims of other former IBM employees. Such efforts to evade the confidentiality provision to which Stafford agreed in her arbitration agreement are a strong countervailing consideration against unsealing.
Stafford v. International Business Machines Corporation, 78 F. 4th 62, 71 (2nd Cir. 2023).
