When a party receives notice of an arbitration proceeding but does not object to the arbitration, the party is procedurally barred from raising a post-award challenge to the existence of the arbitration agreement, according to the North Carolina Court of Appeals.

In Advantage Assets, Inc. II v. Howell, No. COA07-878, 2008 WL 1946828 (N.C. Ct. App. May 6, 2008), Advantage Assets (Advantage) filed an arbitration claim against Howell, seeking to collect the unpaid balance on an MBNA credit card. Howell did not participate in the arbitration, and the arbitrator issued an award in favor of Advantage.

Five moths later, Advantage filed a motion to confirm the award. In opposing the motion, Howell denied the existence of any arbitration agreement and alleged that Advantage had not proven the debt. Following a motion hearing, the trial court confirmed the award.

On appeal, Howell argued that he was entitled to a jury trial on the issue of whether any arbitration agreement existed. In addressing this argument, the Court first determined that the Federal Arbitration Act (FAA) governed the arbitration agreement because the agreement specifically invoked the FAA.

Turning to Howell's argument that he was entitled to a jury trial, the Court examined section 4 of the FAA, which provides for a jury trial where the making of an arbitration agreement is at issue. The Court found that Howell's challenge to the existence of the arbitration agreement was procedurally improper because he received notice of the arbitration but did not contest the existence of the arbitration agreement until the confirmation stage.

Specifically, the Court stated that Howell "did not avail himself of the proper procedural mechanism to challenge the existence of an arbitration agreement provided by 9 U.S.C. § 4." In other words, since Howell had notice of the arbitration, he should have requested a section 4 determination before the award was issued. Accordingly, the Court affirmed the order confirming the award.

In this case, Howell argued that the Court should apply the Revised Uniform Arbitration Act (RUAA), instead of the FAA. However, the RUAA offers no support to Howell's position because the RUAA expressly provides for a party to seek a stay of arbitration where that party is contesting the existence of the arbitration agreement. See, e.g., N.C. Gen. Stat. § 1-569.7(b). As such, Howell's opposition to confirmation was procedurally improper under both the FAA and the RUAA.