Circuit provides guidance on when secret arbitration rulings must remain secret

One of the major objections to mandatory arbitration is that these cases are decided in private. Arbitration firms like JAMS and AAA are not public tribunals; they are private, and arbitration rulings, including those in important cases, are shielded from the public. This case highlights how it all works.

The case is Stafford v. International Business Machines, issued on August 14. Stafford won her arbitration hearing against IBM, as the arbitrator found that she was the victim of age discrimination. Pursuant to the Federal Arbitration Act, Stafford then moved to confirm the arbitration ruling in federal court. In the confirmation motion, she included a copy of the arbitration ruling under seal, all the while asking the trial court to unseal the ruling as part of the confirmation process. The trial court granted plaintiff's motion. The Court of Appeals reverses.

Why the reversal? Because IBM mooted the confirmation motion by paying out Stafford's damages. The Court of Appeals (Park, Nardini and Nathan) reasons:

Stafford’s petition to confirm her purely monetary award became moot when IBM paid the award in full because there remained no “concrete” interest in enforcement of the award to maintain a case or controversy under Article III [of the U.S. Constitution]. Second, any presumption of public access to judicial documents is outweighed by the importance of confidentiality under the FAA and the impropriety of Stafford’s effort to evade the confidentiality provision in her arbitration agreement.

The arbitration agreement that Stafford signed when she began working for IBM contained a confidentiality provision stating that the arbitration decision would remain secret even if she won the hearing. 

Once IBM decided to pay out Stafford's damages, the federal court confirmation proceeding was mooted because there was no longer any reason for the SDNY to confirm the arbitration ruling. As for Stafford's request the federal court unseal the arbitration ruling, the Court of Appeals holds the SDNY improperly granted that motion. The Second Circuit holds that the district court "failed to weigh the FAA’s strong policy in favor of confidentiality and Stafford’s improper effort to evade the confidentiality provision of the Agreement against the presumption of public access to judicial documents." The Court holds that, while Stafford attached the arbitration ruling to her confirmation proceeding, the presumption of access to judicial documents is weak because the petition to confirm the award was moot. Moreover, the Court considers why Stafford wanted to publicize the arbitration ruling and finds that that reason does not override the presumption of confidentiality that attaches to arbitration rulings:

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.