AAA Adopts Optional Appellate Arbitration Process

by Proskauer Rose LLP
Contact

The American Arbitration Association (AAA) has released new rules establishing an optional appeals process for parties involved in arbitration. Effective November 1, 2013, the Optional Appellate Arbitration Rules (Rules) afford parties an opportunity to seek review of unfavorable arbitration awards before an appellate arbitral panel. The Rules describe the process and requirements for parties wishing to have a decision reviewed in appellate arbitration.

The new Rules offer an alternative to the narrow grounds and limited scope of judicial review of arbitration awards. Typically, a court will not vacate an arbitration award except in rare cases where: (1) the award was procured through fraud, corruption, or undue means; (2) the arbitrator was plainly biased; (3) the arbitrator was guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) the arbitrator exceeded his or her powers.[1] While these bases pertain to the fairness of the arbitration procedure, the new Rules permit appeals on substantive grounds.

Parties who adopt the Rules can now appeal on the grounds that the underlying arbitration award is based on (1) material and prejudicial errors of law, and/or (2) "clearly erroneous" factual determinations. Further, the appellate arbitrators will apply a comparable standard of review to an appellate court reviewing a trial court decision. Thus, arbitration subject to the new Rules more closely resembles the appellate review process found in the courts, but promises an expedited, cost-effective review process.

How to Appeal

Importantly, the AAA or the International Center for Dispute Resolution® (ICDR®) will only hear appeals of arbitration awards when all parties expressly agree to the Rules by contract or stipulation. Without such an agreement, a party cannot unilaterally appeal an arbitration award. If, within thirty (30) days of the underlying arbitration award, a party decides to appeal, the appellant must:

  • File a "Notice of Appeal" to the AAA and all parties to the underlying award;
  • File a copy of the applicable arbitration agreement to the AAA and all parties to the underlying award;
  • File a copy of the underlying award to the AAA; and
  • Pay an administrative filing fee of $6,000.

The AAA will choose an "appeal tribunal" from its "Appellate Panel," which includes former federal and state judges and other arbitrators with strong appellate backgrounds. There is some flexibility in the appointment of arbitrators. Parties can appoint the tribunal themselves, or follow the AAA's appointment procedures if they do not agree on a tribunal. The AAA will appoint a panel of three arbitrators, unless the parties decide to use only one.

The appellate tribunal will consider the merits of the appeal on written documents, without oral argument. Still, if necessary, the tribunal can elect to hear oral arguments or the tribunal can honor a party's request for oral argument. The Rules also require the parties to compile a record on appeal. After considering the record and the appellate briefs, the tribunal will either: (1) adopt the underlying award; (2) substitute its own award for the underlying award; or (3) request additional information and exercise an option to extend the process for no more than thirty (30) days.

Take-away

The Rules aim to promote arbitration as an easy, fast, and efficient forum for dispute resolution. The AAA states that the appeals process can be completed in roughly three months. It appears the Rules also carve-out an exception and are not applicable in the context of disputes arising from standard contracts for consumer goods or services.

The new Rules bear some significant costs. Excluding the $6,000 administrative fee, the appellant may be assessed the appeal costs, and other reasonable costs of the appellee incurred after the commencement of the appeal if the tribunal determines that the appellant is not the prevailing party. This can include attorneys' fees if the contract or a statute provides for such. Therefore, the appellate process seems best suited for parties involved in large, complex cases, for which the Rules were primarily designed.

Moreover, parties wishing to adopt the Rules should consider obtaining resources to maintain an adequate record. The Rules require parties to compile a record and also allow parties to submit expert reports, deposition transcripts, documentary evidence, excerpts of the transcript from the underlying arbitration, and other relevant evidence. Since an extensive record may come at a high expense, the new Rules seem most appropriate for large or important cases.

Presently, some employers have pre-dispute mandatory arbitration agreements in which employees waive their right to a judicial forum in all, or many, disputes. Those agreements may provide for AAA procedures and arbitrator selection; however, the new appellate Rules do not apply unless the parties affirmatively include them in such agreements. Accordingly, employers should be aware of the Rules and how adopting the Rules in an arbitration agreement may affect the cost, length, overall process, and outcome of arbitration.

[1] Federal Arbitration Act, 9 U.S.C. § 10.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Proskauer Rose LLP | Attorney Advertising

Written by:

Proskauer Rose LLP
Contact
more
less

Proskauer Rose LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.