Reference no: EM133424508

Caser Study: Stella and Myrtle have a contract that includes a binding arbitration clause requiring the parties to arbitrate any legal dispute that arises out of their contract.

The arbitration clause provides that, if such a dispute arises, each party selects one arbitrator, and these two arbitrators decide the dispute. If these two arbitrators are unable to agree, the arbitration clause requires each arbitrator to state their conclusion on the dispute. Then, the arbitration clause requires the two arbitrators to choose a third arbitrator. This third arbitrator, without any further consultation or testimony, picks one of the two conclusions, and this becomes the arbitration award. The arbitration clause further provides that the arbitrators are authorized to award up to $250,000 in damages in any particular dispute.

A dispute arises and is submitted to arbitration as described in the agreement. After the hearing, Arbitrator Ann concludes there was no legal violation. On the other hand, Arbitrator Zed concludes there were gross violations of the law worth $400,000 in damages. Unable to agree on the proper conclusion for the dispute, the two arbitrators choose Arbitrator Xee as the third arbitrator. Arbitrator Xee makes Arbitrator Zed's conclusion the arbitration award. The award is appealed to a court.

Question : Is the court likely to uphold or strike down the award? Why? Fully discuss all issues relevant to the resolution of this case.