February 4, 2014

In a prior e-Alert, the Commercial Litigation practice outlined the issues confronting your business when deciding whether to enter into a contractual arbitration agreement. The alert noted that an important issue to consider is the typically non-appealable nature of an arbitration award. It has become increasingly apparent that there can be a downside to the finality of arbitration that does not necessarily exist in litigation. An arbitrator may misinterpret or misapply the operative law, and, in some cases, may manifestly disregard the law. Even so, parties rarely succeed on motions to vacate an arbitration award. Under the Federal Arbitration Act (FAA), a court may only review an arbitration award under very limited circumstances, such as to ensure there was no fraud in procuring the award and no bias, corruption or misconduct by the arbitrator. Courts will generally defer to an arbitrator's findings of fact and application of law. Many businesses sacrifice litigation's robust appellate review for the efficiency and finality associated with arbitration. However, the New American Arbitration Association (AAA) rules, adopted November 1, 2013, now provide a mechanism for appealing arbitration rulings within the confines of the AAA, before taking the issues to court.

To view the full Alert, click here.