Varela, Lee, Metz & Guarino (VLMG)

American Arbitration Association Adopts Optional Appellate Rules

ยป Posted May 14, 2014David WonderlickNews, Publications

by David Wonderlick, Partner

 

Construction contracts frequently require the submission of disputes to arbitration. Though arbitration offers numerous advantages, one possible drawback arises from the very limited grounds for judicial review of an unfavorable award. Recent U.S. Supreme Court decisions have narrowed the scope of possible review even further.

 

As an alternative for parties concerned with appeal rights, the American Arbitration Association (“AAA”) recently released “Optional Appellate Arbitration Rules.” These Rules permit appellate review of an award within the arbitration process itself. Parties must affirmatively stipulate to utilize the Rules; simply agreeing to arbitrate before the AAA, without explicit mention of the appeal procedures, will not result in application of the Rules.

 

Under the Rules, a party may appeal on the grounds that an award “is based upon (1) an error of law that is material and prejudicial; or (2) determinations of fact that are clearly erroneous.” The party must appeal within 30 days of the award. The appeal will be heard by a panel of three arbitrators, unless the parties agree to use a single arbitrator. The arbitrators will be selected from a panel comprised of neutrals with strong appellate backgrounds.

 

In addition to the appellate arbitrators’ fees, the AAA requires a $6,000 administrative fee for filing an appeal. The panel also may hold the appellant liable for the appellee’s costs in the event of an unsuccessful appeal. 

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