"The Arbitrator Exceeded Her Authority": Specific Arbitration Agreement Terms Lead to Successful Appeal of Award

            It is difficult to appeal an arbitrator’s award due to limited appeal grounds and deferential standards governing arbitral review. But one party in the Seventh Circuit recently did just that. See USAA Savings Bank v. Goff, No. 25-1730 (7th Cir. Mar. 19, 2026). And their successful outcome in the case was a product of the fact that they included specific and protective language in their arbitration agreement that cabined the arbitrator’s remedial authority and procedural measures. Transactional attorneys should take note. 

Case Background

            In the case, the bank closed a consumer’s credit card account and allegedly gave conflicting reasons for doing so. This prompted the consumer to initiate arbitration under an arbitration clause in his credit card agreement and to seek actual and punitive damages. After an evidentiary hearing, the arbitrator found no actual damages yet still awarded attorney’s fees and $10,000 in punitive damages. The bank then moved to invoke a special punitive-damages review mechanism under the arbitration clause, which stated:

Before the decision [to award punitive damages] becomes final, the arbitrator must also conduct a post-award review of any punitive damages, allowing the parties the same procedural rights and using the same standards and guidelines that would apply in a judicial proceeding in the state where the arbitration is located. Any ruling based on this post-award review must be set forth in writing with a reasoned explanation.

            The arbitration agreement further stated that the AAA Rules only applied if they did not “conflict with the terms of the arbitration agreement,” expressly subordinating the AAA’s institutional rules to the contract’s bespoke procedural requirements.​

            However, the arbitrator, when asked to perform the required post-award review, responded that the AAA Rules did not allow her to “re-determine the merits of any claim already decided” and that she therefore lacked authority to conduct the requested analysis. The bank objected and immediately sought vacatur in federal court, with the case ultimately making its way to the Seventh Circuit on further appeal.

Outcome and Remedy

            The Seventh Circuit sided with the bank. It concluded that, because the arbitrator did not undertake the contractually mandated post-award review process, there could be “no final arbitration award” on punitive damages. 

            The Seventh Circuit’s decision is notable in that it sets new precedent in an area of the law where courts have historically had “extremely limited” review authority. Indeed, the Federal Arbitration Act provides in this context that an award should only be vacated where “arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” 9 U.S.C. § 10(a)(4). The question on review is generally not whether the arbitrator erred, clearly erred, or even grossly erred—which would often be sufficient to overturn a federal district court decision—but whether the arbitrator actually interpreted the contract. That is a difficult standard in many cases to overcome.

            In USAA Savings Bank v. Goff, however, the Seventh Circuit held that the arbitrator had “no possible interpretative route” for its decision. The arbitrator had ignored the arbitration agreement’s plain terms. The court thus concluded that, because the contract language was “clear and unambiguous and needs no interpretation,” the arbitrator exceeded her authority under section 10(a)(4) by refusing to even arguably apply the contract. 

Practical Takeaway

            The Seventh Circuit’s decision provides positive guidance to transactional attorneys who prepare and counsel clients on arbitration clauses. As a first point, the case suggests that parties should be clear and detailed in setting forth any particularized standards or procedures that they seek to impose on the arbitration process. Second, the contract terms may be bolstered and potentially be more enforceable if the contract makes clear that the terms are mandatory and supersede any contrary procedures that would otherwise be required by the arbitral tribunal. Among other things, contracting parties should consider including terms in their arbitration clauses that expressly subordinate the applicable arbitral rules to the contract’s defined procedural requirements.