A federal district court in California determined that under the Federal Arbitration Act (FAA), judicial review of interim arbitration awards is only permitted in the most extreme cases, because to permit interim awards to be reviewed contravenes federal arbitration policy.

In In re Pacific Gas & Electric Co., No. CV-08-1211 CW, 2008 WL 2004275 (N.D. Ca. May 5, 2008), Knowles was an employee at a Pacific Gas & Electric (PG&E) power plant. Subsequently, PG&E sold the plant and negotiated with the local union for benefits packages for certain employees laid off due the sale of the plant. The agreement granted qualified employees preferential re-employment rights up to thirty months after a layoff.

When PG&E allegedly denied Knowles the negotiated employee benefits and preferential right to re-employment, Knowles filed a demand for arbitration. PG&E filed an objection to jurisdiction and arbitrability of certain claims, and a motion to dismiss. The arbitrator issued an interim award granting in part and denying in part PG&E's motion to dismiss.

The arbitrator's interim award determined that two assertions in Knowles' claim were not arbitrable, but the other two allegations were arbitrable. PG&E filed a motion to vacate the arbitrator's interim award and asserted that the arbitrator exceeded his powers and acted in manifest disregard of the law.

Under the FAA, courts may review final arbitration awards. However, no interlocutory review is intended for review of interim awards. Further, only in the most extreme cases will judicial review of a non-final award be proper.

The Court stated that allowing judicial review prior to the final award would contravene the fundamental federal policy and purpose of arbitration: the speedy resolution of grievances without the time and expense of court proceedings.

Because this award was not final, it was not reviewable by the lower court absent exceptional circumstances. PG&E did not offer any compelling reason for immediate review. PG&E argued that the arbitrator exceeded his authority and acted in manifest disregard the law when he found the alleged oral promise arbitrable.

The FAA provides grounds for vacating a final award, but it does not provide for vacatur of an interim award. Further, PG&E did not explain what irreparable harm or injury the interim award would cause. Thus, the Court did not find this case to be an extreme one warranting an exception to the general rule.