The opinion of the court was delivered by: LARIMER
The following facts are not in dispute. Paychex is a New York corporation that provides companies with various types of services, including payroll processing, payroll tax preparation, and life and health insurance products and services. MVI is a California corporation offering insurance services.
In April 1992, the parties entered into a contract ("the contract") by which Paychex agreed to give MVI the exclusive rights to sell and service life and health insurance products to Paychex clients. See Petition Ex. A. In paragraph 24 of the contract, the parties agreed to submit to arbitration any controversy with respect to the contract or the parties' performance obligations under the contract. Id. at 25. The contract further stated that "judgment or any award of the arbitrators may be entered in any court having jurisdiction." Id. at 26.
In December 1993, Paychex notified MVI of its intent to terminate the contract without cause. Certain disputes arose between the parties concerning their respective obligations under the contract, and in the parties agreed to arbitrate those disputes in accordance with the contract.
Paychex proposed to MVI that they bifurcate the arbitration proceeding into separate liability and damages phases. MVI initially opposed this idea, opining that such a procedure would likely be duplicative and costly. Respondent's Motion Ex. A. Subsequently, however, MVI changed its mind; MVI's attorney apparently informed Paychex's attorney of that fact in an oral conversation, the substance of which he confirmed in a letter dated August 1, 1995. In the letter, MVI's attorney stated that "the liability phase of the hearing has been scheduled, by agreement among us and the arbitrators, for November 6-9, 1995. We intend to schedule the damages hearing on a later date convenient to everyone." Respondent's Motion Ex. B.
The hearing on liability was held as scheduled. On February 2, 1996, the panel issued a unanimous written decision on the liability issues. The specific findings of the panel are not of great importance here, but for the most part they favored MVI.
MVI filed the instant petition on February 14, 1996, seeking an order confirming the panel's decision on liability. Paychex has moved to dismiss the petition on the ground that the panel's February 2 decision is interlocutory insofar as it did not deal with the issue of damages, and that the decision is therefore not subject to confirmation at this time.
An arbitration award must be "final" before it can become subject to judicial review under the FAA. Michaels v. Mariforum Shipping, S.A., 624 F.2d 411, 414. (2d Cir. 1980). Thus, a petition to confirm an interlocutory award should be dismissed as premature. Id. at 415.
In general, an arbitration award is not considered "final" unless it was intended by the arbitrators to be their complete determination of all claims submitted to them. Id. at 413. This ordinarily requires that the arbitrators have determined the issues of both liability and damages. Id. at 414.
the applicability of [this] principle must be assessed in light of two other pertinent principles. First, the submission by the parties determines the scope of the arbitrators' authority. Thus, if the parties agree that the panel is to make a final decision as to part of the dispute, the arbitrators have the authority and responsibility to do so. Second, once arbitrators have finally decided the submitted issues, they are, in common-law parlance, "functus officio, " meaning that their authority over those questions is ended. Thus, if the parties have asked the arbitrators to make a final partial award as to ...