Arbitration

AAA Announces New Appellate Procedure

When I served at the CPR Institute we periodically reminded users of arbitration that the Institute had devised a procedure whereby parties could contract for appellate review of arbitration awards.  I think I am correct that during my 10-year tenure no one ever availed themselves of these procedures, which on their face deprived arbitrated outcomes of one of their defining attributes — finality.

Nevertheless, one of the defining attributes of the American Arbitration Association in the past several years is its responsiveness to end-user concerns, and the Association reports that one of those concerns is a procedural safeguard against nutty awards.  So it has promulgated a revised set of Appellate Arbitration Rules.  The AAA explains:

The AAA’s new set of Optional Appellate Arbitration Rules (effective November 1, 2013) provides parties with a streamlined, standardized, appellate arbitration procedure that allows for a high-level review of arbitral awards while remaining consistent with the objective of an expedited, cost effective and just appellate arbitral process.

Traditionally, courts use narrowly-defined statutory grounds to set aside an arbitration award. Alternatively, these new rules provide for an appeal within the arbitration process. The appellate arbitral panel applies a standard of review more expansive than that allowed by existing federal and state statutes to vacate an award.  In this regard, the optional rules were developed for the types of large, complex cases where the parties think the ability to appeal is particularly important.

Sometimes I just feel out of date.  I understand arbitration to be the tool of merchants who, in the course of their business, encounter disagreements with commercial counterparties that require quick and decisive disposition in order not to interrupt the business.  You are trading 1000 bales of raw cotton a day, and over the course of a year some of those 365,000 bales will either be of disputed quality or will not be paid for.  So you have the cotton arbitrator make decisions.  Some go for you and some against, but the bales keep rolling in and keep rolling out and over the year it all evens out.  In other words, arbitration is a way to make sure cotton merchants don’t spend a lot of time on stuff other than cotton.

Clearly, not so today.  Arbitration is conducted by lawyers and time is spent examining the hard drives of folks’ computers.  Moreover, we’re not talking cotton bales any more.  Folks are subject to arbitration — completely unknowingly — if they hook up a cable to their TV, buy a share of stock, or open a credit card account.   Indeed, one of my favorite illustrations of the place arbitration has taken in the American mentality is this sign, posted on the door of a retail establishment:

Arbit Notice on Door

(By the way, love that “American Mediation Association,” don’t you?)

So, according to the AAA, users of arbitration want an opportunity to put down their cotton bales and not only argue over one of the bales, but spend a second day arguing over the outcome of the argument they just had.  Meanwhile, the bales pile up at the wharf.  Surprises me, but, like I say, some days I just feel out of date.

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