Pursuant to a mandatory arbitration clause in the crop insurance policies, the parties submitted their disputes to binding arbitration. After an evidentiary hearing, the arbitrator issued a final arbitration award in favor of NAU, denying the Karos' claims under the “prevented planting coverage” of the crop insurance policies. The arbitrator found that “[t]he evidence as presented, concerning the excessive moisture in the area in early spring, did not prevent most other producers with acreage with similar characteristics from planting their acres.”

More than three months later, the Karos asked a Nebraska court to vacate the arbitration award. After an evidentiary hearing, the court granted the Karos' summary judgment motion and vacated the arbitration award under Section 10(a)(4) of the Federal Arbitration Act (“FAA”), finding that the arbitrator had exceeded his powers and had manifestly disregarded the law.

The dispute reached the Nebraska Supreme Court.

The Crop Insurance Policies

The crop insurance policies defined:

prevented planting 

as:

Failure to plant the insured crop by the final planting date designated in the Special Provisions for the insured crop in the county, or within any applicable late planting period, due to an insured cause of loss that is general to the surrounding area and that prevents other producers from planting acreage with similar characteristics. Failure to plant because of uninsured causes such as lack of proper equipment or labor to plant the acreage, or use of a particular production method, is not considered prevented planting. 

The policies also provided:

If it is possible for you to plant on or prior to the final planting date when other producers in the area are planting and you fail to plant, no prevented planting payment will be made. 

Section 12 of the FAA provides:

Notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered. If the adverse party is a resident of the district within which the award was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse party shall be a nonresident then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.

Section 9 of the FAA provides:

[A]ny time within one year after the award is made any party to the arbitration may apply to the court . . . for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. . . . Notice of the application shall be served upon the adverse party, and thereupon the court shall have jurisdiction of such party as though he had appeared generally in the proceeding. If the adverse party is a resident of the district in which the award was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.

The Nebraska Supreme Court's Decision

The court vacated the decision of the trial court and dismissed the appeal.

In its decision, the court explained that, under the FAA, there is a three month notice requirement for seeking judicial vacatur of an arbitration award. Here, the court observed, the Karos had filed and served their motion to vacate outside the three month period mandated by FAA Section 12.

The court then ruled that the three month time limit under Section 12 was “jurisdictional in nature” and, as such, could “not be waived.”

After examining FAA Sections 9 and 12, it reasoned that, due to the “similarity of the mandatory notice procedures” in those sections, whether an arbitrating party applied for judicial review to confirm an award or to vacate or modify an award, “Congress intended that a party's failure to serve notice of the application in the manner directed, and within mandatory time limits, would have jurisdictional consequences.”

Accordingly, it concluded, the Karos' failure to comply with the three month requirement deprived the trial court of authority under the FAA to vacate the arbitration award under Section 10, and its order was void.

The case is Karo v. NAU Country Ins. Co., No. S-16-810 (Neb. Sep. 22, 2017). Attorneys involved include: Thomas M. Locher and Amy Locher, of Locher, Pavelka, Dostal, Braddy & Hammes, L.L.C., and Mitch D. Carthel, of Mullin, Hoard & Brown, L.L.P., for appellant. Sean A. Minahan, of Lamson, Dugan & Murray, L.L.P., for appellees.