Section 10(a)(1) – Corruption, Fraud, or Undue Means

yay-2078401-digitalFraudCorruptionSection 10(a)(1) authorizes courts to vacate awards where “[t]he award was procured by corruption, fraud, or undue means. . . .”  9 U.S.C. 10(a)(1).  Cases vacating awards on Section 10(a)(1) are rare, presumably because the circumstances that would trigger relief are themselves relatively rare.







yay-521932The burden for obtaining relief under Section 10(a)(1) is heavy.  Fraud and corruption are serious allegations, to say the least.  And “undue means” has been construed to be a bird of the same feather:  Like fraud and corruption it requires “proof of intentional misconduct” or “bad faith,” and “connotes behavior that is immoral if not illegal. . . .”  See, e.g., PaineWebber Group, Inc. v. Zinsmeyer Trusts P’ship,  187 F.3d 988, 991 (8th Cir. 1999) (quotations and citations omitted).   Given the gravity of all of this, three requirements must generally be satisfied to make out a claim under Section 10(a)(1):  “(1) clear and convincing evidence of fraud [, corruption or undue means][;] (2) that the fraud [, corruption or undue means] materially relates to an issue involved in the arbitration[;] and (3) that due diligence would not have prompted the discovery of the fraud [corruption or undue means] during or prior to the arbitration.”   Int’l Bhd. of Teamsters, Local 519 v. United Parcel Serv., Inc., 335 F.3d 497, 503 (6th Cir. 2003); see, e.g., Bonar v. Dean Witter Reynolds, Inc., 835 F.2d 1378, 1383 ( 11th Cir .1988).


Section 10(a)(1) says that the “award” must be “procured” by the fraud, corruption or undue means, and that suggests a causal nexus between the proscribed conduct and the award.  While the conduct must “materially relate to an issue in the arbitration,” must it also be outcome determinative?  In other words, must the party seeking relief show that the award would have been different but for alleged fraud, corruption or undue means, or is it enough to show that it tainted the proceedings simply because it related materially to one of the issues at stake?

The circuits are split on this point.  Some courts require the challenger to show that the corruption, fraud or undue means “caused the award to be given.”  See, e.g.,  A.G. Edwards & Sons, Inc. v. McCullough, 967 F.2d 1401, 1403 (9th Cir. 1992).  Others say that the challenger is not required to “establish that the result of the proceedings would have been different had the fraud [, corruption, or undue means]  not occurred.”  See, e.g., Bonar, 835 F.2d at 1383.

Section 10(a)(1) is probably the least commonly invoked ground for vacating an arbitration award.  That said, it provides an important safety valve to address what are hopefully rare, but extremely important cases where an award is the product of  corruption, perjured testimony or other egregious misconduct, and where the challenger was unable to address the problem before the arbitrators.