The Fifth Circuit Court of Appeals recently held that a district court overstepped the bounds of a court’s inherent authority by sanctioning conduct that occurred in connection with an arbitration proceeding.
In Positive Software Solutions, Inc. v. New Century Mortgage Corp., the district court invoked its inherent authority to sanction and sanctioned the attorney representing New Century for conduct that had occurred during an arbitration proceeding. Relying on established precedent, the appellate court observed that inherent power does not extend to collateral proceedings that do not threaten the court’s own judicial authority or proceedings. The Fifth Circuit expressed its concern that a district court might use its inherent power to sanction as a means to seize control over substantive aspects of arbitration. The Court went on to set out two means by which a party could seek redress for wrongdoing during an arbitration proceeding after the conclusion of the proceeding: (1) the grievance process, or (2) reopening the proceedings.
The Court’s opinion may be found at this link.