## Facts

- Hart Surgical, Inc. entered a written agreement making it the exclusive Canadian distributor for UltraCision, Inc.’s products; the agreement contained an arbitration clause.
- In February 1996, UltraCision terminated the distributorship for alleged nonperformance.
- Hart initiated arbitration against UltraCision and Ethicon Endo-Surgery, Inc., contesting the termination.
- The parties stipulated, and the arbitral panel approved, bifurcation into separate liability and damages phases.
- After a liability hearing, the arbitrators issued a written award on August 19, 1997 finding wrongful termination; damages were left for later proceedings.
- UltraCision and Ethicon filed a federal petition to vacate the liability award; the district court dismissed for lack of a “final” award because damages had not been determined.

## Issues

1. Whether an arbitral award resolving only liability in a bifurcated arbitration is a “final” award (i.e., a final partial award) subject to judicial review and vacatur under the Federal Arbitration Act.

## Decision

- The First Circuit reversed the district court’s dismissal and remanded.
- The court held that, under these circumstances, the liability determination was a final partial award reviewable under the FAA.
- The court directed the district court to consider the merits of the motion to vacate the liability award.

## Legal Principles

- An arbitration award may be “final” for FAA review even if it does not dispose of all matters submitted, so long as it finally and definitively disposes of a separate and independent claim.
- In a bifurcated arbitration, a liability-only award can qualify as a final partial award when the panel conclusively resolves liability and leaves only damages for later determination.
- Courts apply a functional finality approach: finality turns on whether the arbitrators have completed their determination of a distinct issue, not on whether all phases of the arbitration are finished.

## Conclusion

Because the parties and arbitrators structured the proceeding to decide liability conclusively before damages, and the panel’s liability award fully resolved that separable component, the award was a final partial award subject to immediate judicial review under the FAA; dismissal for lack of finality was error.


Hart Surgical, Inc. v. UltraCision, Inc., 244 F.3d 231 (1st Cir. 2001)