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Archive for the ‘Businessperson’s FAQ Guide to the Federal Arbitration Act’ Category

Section 9 | Confirming Awards Part III | Post-Award Federal Arbitration Act Enforcement Litigation Businessperson’s Federal Arbitration Act FAQ Guide

June 22nd, 2020 Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Awards, Businessperson's FAQ Guide to the Federal Arbitration Act, Confirmation of Awards, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 9, Nuts & Bolts, Nuts & Bolts: Arbitration, Petition or Application to Confirm Award, Section 9, Uncategorized No Comments »
Section 9 Confirm Award

In the last two segments of the Businessperson’s Federal Arbitration Act FAQ Guide, we discussed the substantive and procedural requirements for confirming under Section 9 Chapter One Domestic Awards, that is, domestic awards that fall under Chapter One of the Federal Arbitration Act, but not under Chapter Two, which implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. (See here and here.)  Now we address additional, FAQs concerning the confirmation under Section 9 of Chapter One Domestic Awards.

Does an Application to Confirm under Section 9 a Chapter One Domestic Award Require One to File a Full-Blown Law Suit to Confirm an Award?

Fortunately, the answer is no. Like all other applications for relief under the FAA, an application to confirm an award under Section 9 is a summary or expedited proceeding, not a regular lawsuit.  Rule 81(a)(6)(B) of the Federal Rules of Civil Procedure provides that the Federal Rules “to the extent applicable, govern proceedings under the following laws, except as these laws provide for other procedures. . . (B) 9 U.S.C., relating to arbitration.  .  .  .” Fed. R. Civ. P. 81(a)(6)(B).

Section 6 of the FAA “provide[s] for.  .  . procedures” other than those applicable to ordinary civil actions because it requires applications for relief under the FAA to be made and heard as motions:

Any application to the court hereunder shall be made and heard in the manner provided by law for the making and hearing of motions, except as otherwise .  .  .  expressly provided [in the FAA].

9 U.S.C. § 6.

A Section 9 action to confirm an award is, of course, “[a]n application to the court” under the FAA, and thus, unless the FAA otherwise provides, must be “made and heard in the manner provided by law for the making and hearing of motions.  .  .  .”

Confirming Arbitration Awards under Section 9: What Papers does a Party File to Apply for Confirmation of an Award?

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Confirming Awards Part II | Post-Award Federal Arbitration Act Enforcement Litigation | Section 9 of the Federal Arbitration Act | Businessperson’s Federal Arbitration Act FAQ Guide

June 19th, 2020 Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Awards, Businessperson's FAQ Guide to the Federal Arbitration Act, Confirmation of Awards, Consent to Confirmation, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 9, Nuts & Bolts, Nuts & Bolts: Arbitration, Personal Jurisdiction, Petition or Application to Confirm Award, Section 9, Small Business B-2-B Arbitration, Statute of Limitations No Comments »
Confirming Awards Procedure

In the last segment of this Businessperson’s Federal Arbitration Act FAQ Guide, we discussed the substantive requirements for confirming a Chapter One Domestic Award. Now we turn to the procedural requirements.

What are the Procedural Requirements for Confirming a Chapter One Domestic Award?  

The key procedural requirements for confirming arbitration awards are:

  1. The party seeking confirmation may apply for it “within one year after the award is made.  .  .”;
  2. Notice of application must be properly served;
  3. Venue must be proper; and
  4. The “court must grant” confirmation “unless the award is vacated, modified or corrected” under Section 10 or 11 of the FAA.

9 U.S.C. § 9.

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MCA Group, Video Conference Hearings, and COVID-19 | Federal Arbitration Act Section 7 Part III | Businessperson’s Federal Arbitration Act FAQ Guide

May 19th, 2020 Arbitral Subpoenas, Arbitration and Mediation FAQs, Arbitration Law, Arbitration Practice and Procedure, Businessperson's FAQ Guide to the Federal Arbitration Act, COVID-19 Considerations, FAA Chapter 1, Federal Arbitration Act Section 7, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure, Pre-Award Federal Arbitration Act Litigation, Section 7, Subpoenas, United States Court of Appeals for the Eleventh Circuit, Video Conference Hearings No Comments »
MCA Group | Arbitral Subpoenas

The last instalment of the Businessperson’s Federal Arbitration Act FAQ Guide discussed whether under Section 7 of the Federal Arbitration Act arbitrators can issue an enforceable subpoena that purports to allow a witness to appear at a hearing via video conference or teleconference. It explained that the answer, at least according to the U.S. Court of Appeals for the Eleventh Circuit in Managed Care Advisory Grp. v. CIGNA Healthcare, 939 F.3d 1145, 1158-61 (11th Cir. 2019) (“MCA Group”), is “no.”

In light of COVID-19 restrictions, in-person hearings are unlawful in certain jurisdictions, or at least contrary to government-issued medical guidance. As a practical matter that means the rule espoused by MCA Group would render unenforceable under Section 7 any arbitral subpoena seeking documents or testimony from a third party. Parties and non-parties may agree to comply with subpoenas authorizing video conference appearances, but those subpoenas cannot, under the reasoning of MCA Group, be enforced by courts under Federal Arbitration Act Section 7.

This instalment addresses the question whether other courts are likely to follow MCA Group, particularly in light of the COVID-19 pandemic.

Will Courts follow the 11th Circuit MCA Group Decision in Light of the COVID-19 Crisis?

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How Section 5 Arbitrator Appointment Works in Practice | Businessperson’s Federal Arbitration Act FAQ Guide | Nuts and Bolts of Pre-Award Federal Arbitration Act Practice

May 4th, 2020 Application to Appoint Arbitrator, Arbitration and Mediation FAQs, Arbitration Law, Arbitration Practice and Procedure, Arbitrator Selection and Qualification Provisions, Arbitrator Vacancy, Businessperson's FAQ Guide to the Federal Arbitration Act, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 5, Nuts & Bolts, Nuts & Bolts: Arbitration, Pre-Award Federal Arbitration Act Litigation, Section 5, Small Business B-2-B Arbitration, United States Court of Appeals for the Second Circuit 1 Comment »
contract | Section 5 | Appoint Arbitrator

The last instalment of this post discussed Section 5, the circumstances under which Courts can appoint arbitrators under Section 5, what papers are filed on a Section 5 application, and what the application should show.

This segment addresses the FAQ “How does Section 5 Work in Practice?” Next we’ll address the FAQ “Does Section 5 of the Federal Arbitration Act Authorize a Court to Appoint a Replacement Arbitrator if an Arbitrator on a Three-Person Panel Dies Prior to the Panel Making an Award?”    

The Arbitrator Selection Process

Once arbitration is demanded, the arbitrator selection process begins.

Arbitration agreements address arbitrator selection in different ways. Sometimes parties simply agree that the process set forth in arbitrator provider rules applies. Sometimes parties specify their own method of selection, and sometimes by their agreement they modify an otherwise agreed provider-rule-governed selection procedure.

The qualifications of the arbitrators, the number of arbitrators to serve, and the procedures (if any) to apply if the parties reach an impasse, are key components of the selection process.

For illustration purposes only let’s consider how, for example, arbitrator selection may work under what we sometimes refer to as the traditional, industry tripartite arbitrator selection model. While that model may vary according to the parties’ agreement, typically it requires the party demanding arbitration to appoint a party appointed arbitrator, and for the other party to appoint its own party appointed arbitrator within X days.

The two appointed arbitrators then select an umpire. Sometimes the parties agree that the appointed arbitrators select three umpire candidates each, strike two from the other’s list, and resolve the tie by coin flip, Dow Jones pick (last digit odd or even), or a like tie-breaking procedure.   

If the other party fails to appoint timely its arbitrator, then the party demanding arbitration gets to appoint that arbitrator, and the arbitration may proceed even if the other party refuses to participate.

In administered arbitration, single arbitrators are often appointed by the arbitration provider generating a list of an odd number of arbitrator candidates and allowing the parties to strike an even number of candidates, with the remaining candidate being appointed as an umpire. Sometimes provision is made for the arbitration provider to submit an additional list if one or both parties request it.  

These are simply examples of how arbitrator selection may proceed. If you’ve agreed to administered arbitration, be sure to check provider rules, for they typically specify the number of arbitrators to serve, their qualifications, how they are to be selected, in situations where the parties do not otherwise agree.  

How does Section 5 Work in Practice?

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Appointing Arbitrators | Businessperson’s Federal Arbitration Act FAQ Guide | Nuts and Bolts of Pre-Award Federal Arbitration Act Practice

April 29th, 2020 Application to Appoint Arbitrator, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Arbitrator Selection and Qualification Provisions, Businessperson's FAQ Guide to the Federal Arbitration Act, FAA Chapter 1, Federal Arbitration Act Section 5, First Principle - Consent not Coercion, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure, Section 5, Small Business B-2-B Arbitration 1 Comment »
Appointing Arbitrators

Chapter One of the Federal Arbitration Act enforces arbitration agreements during the pre-award stage by authorizing orders: (a) staying litigation of arbitrable claims; (b) compelling arbitration; (c) appointing one or more arbitrators; and (d) enforcing arbitral hearing subpoenas. We’ve discussed the basics of the first two of these remedies in prior installments of this post. This and one or more other future installments will address he third: an order appointing arbitrators.

This instalment addresses the following FAQs concerning the judicial appointment of arbitrators under 9 U.S.C. § 5:

  1. Under what Circumstances can a Court Appoint Arbitrators under Section 5 of the Federal Arbitration Act?
  2. What Papers Comprise an Application to Appoint an Arbitrator under Section 5?

The next installment will address the FAQs:

  1. “How does Section 5 Work in Practice?”
  2. “Does Section 5 of the Federal Arbitration Act authorize a Court to Appoint a Replacement Arbitrator if an Arbitrator Dies Prior to the Making of an Award?”    

Under what Circumstances can a Court Appoint Arbitrators under Section 5 of the Federal Arbitration Act?

Section 5 of the Federal Arbitration Act provides that “[i]f in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed. . . .” 9 U.S.C. § 5. This provision of Section 5 reflects “the central or primary purpose of the [Federal Arbitration Act (“FAA”)][,]” which is “to ensure that  private agreements to arbitrate are enforced according to their terms.” Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 678-80 (2010) (citation and quotations omitted). It also ensures enforcement of what Circuit Court Judge Richard A. Posner once dubbed the “cornerstone of the arbitral process”: “Selection of the decision maker by or with the consent of the parties. . . . Lefkovitz v. Wagner, 395 F.3d 773, 780 (2005) (Posner, J.); see, e.g., Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Art. V(1)(d), June 10, 1958, 21 U.S.T. 2519, T.I.A.S. No. 6997 (a/k/a the “New York Convention”) (implemented by 9 U.S.C. §§ 201, et. seq.) (award subject to challenge where “[t]he composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties”); Stolt-Nielsen, 559 U.S. at 668, 670 (one of the FAA’s “rules of fundamental importance” is parties “may choose who will resolve specific disputes”) (emphasis added; citations omitted); Encyclopaedia Universalis S.A. v. Encyclopaedia Brittanica, Inc., 403 F.3d 85, 91-92 (2d Cir. 2005) (vacating award by panel not convened in accordance with parties’ agreement); Cargill Rice, Inc. v. Empresa Nicaraguense Dealimentos Basicos, 25 F.3d 223, 226 (4th Cir. 1994) (same); Avis Rent A Car Sys., Inc. v. Garage Employees Union, 791 F.2d 22, 25 (2d Cir. 1986) (same).

In addition to directing that arbitrator selection and qualification provisions be enforced according to their terms, Section 5 authorizes court intervention for appointing arbitrators in three situations:  

  1. “if no method be provided therein. . . [;]”
  2. “if a method be provided and any party thereto shall fail to avail himself of such method[;] or”
  3. “if for any other reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy. . . .”  

9 U.S.C. § 5.

In any of those situations Section 5 authorizes “either party” to make an “application” to the court for an order “designat[ing]” and “appoint[ing] “an arbitrator or arbitrators or umpire,” “who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein. . . .” 9 U.S.C. § 5. Section 5 also states that “unless otherwise provided in the agreement arbitration shall be by a single arbitrator.”  9 U.S.C. § 5.

Appointing Arbitrators: What Papers Comprise an Application to Appoint an Arbitrator under Section 5?

Like applications under Section 4 of the Federal Arbitration Act, and all other applications for relief under the Federal Arbitration Act, an application to appoint arbitrators under Section 5, when brought as an independent legal proceeding in federal district court, is a summary or expedited proceeding, not a regular lawsuit. The application, like all other Federal Arbitration Act applications, is governed by Section 6 of the Act, which provides that “[a]ny application to the court hereunder shall be made and heard in the manner provided by law for the making and hearing of motions, except as otherwise .  .  .  expressly provided [in the Federal Arbitration Act].” 9 U.S.C. § 6.

In cases where the application to appoint an arbitrator commences an independent proceeding in a federal district court, the papers in support of the application will ordinarily consist of: (a) a notice of application; (b) a summons; (c) the application itself; (d) a memorandum of law in support; and (e) any supporting affidavits or declarations, principally (but not necessarily exclusively) for putting before the court pertinent documents. Sometimes the application is referred to as a “petition,” rather than an “application,” but the variation in nomenclature does not change the substance or legal effect of the paper.

Documents that should be submitted to the Court ordinarily include copies of: (a) the contract containing the arbitration agreement; (b) the arbitration demand and any related correspondence, including with the arbitrator provider; (c) any documents evidencing efforts to appoint an arbitrator or arbitration panel; (d) any documents evidencing the presence of one or more of the three grounds under which Section 5 authorizes a court to appoint an arbitrator; and (e) a list of arbitrators the court should consider appointing, along with their qualifications.

The application should show that: (a) the court has subject matter jurisdiction, personal jurisdiction, and venue; (b) the parties entered into a written arbitration agreement falling under the Federal Arbitration Act, or that the applicant is entitled to claim against the respondent under a written arbitration agreement; (c) at least one of the three grounds for Section 5 relief is present; (d) appointing an arbitrator from the applicant’s list is warranted in the circumstances, including under the parties’ agreement.

Please note. . .

This guide, including the installments that will follow in later posts, and prior installments, does not purport to be a comprehensive recitation of the rules and principles of arbitration law pertinent or potentially pertinent to the issues discussed. It is designed simply to give clients, prospective clients, and other readers general information that will help educate them about the legal challenges they may face and how engaging a skilled, trustworthy, and experienced arbitration attorney can help them confront those challenges more effectively.

This guide is not intended to be legal advice and it should not be relied upon as such. Nor is it a “do-it-yourself” guide for persons who represent themselves pro se, whether they are forced to do so by financial circumstances or whether they voluntarily elect to do so.

If you want or require arbitration-related legal advice, or representation by an attorney in an arbitration or in litigation about arbitration, then you should request legal advice from an experienced and skilled attorney or law firm with a solid background in arbitration law.

About the Author

Philip J. Loree Jr. is a partner and founding member of Loree & Loree. He has nearly 30 years of experience handling matters arising under the Federal Arbitration Act and in representing a wide variety of clients in arbitration, litigation, and arbitration-related litigation. He is a former partner of the litigation departments of the New York City firms of Cadwalader, Wickersham & Taft LLP and Rosenman & Colin LLP (now known as Katten Munchin Rosenman LLP).

Loree & Loree represents private and government-owned-or-controlled business organizations, and persons acting in their individual or representative capacities, and often serves as co-counsel, local counsel or legal adviser to other domestic and international law firms requiring assistance or support.

Loree & Loree was recently selected by Expertise.com out of a group of 1,763 persons or firms reviewed as one of Expertise.com’s top 18 “Arbitrators & Mediators” in New York City for 2019, and now for 2020. (See here and here.)

If you have any questions about arbitration, arbitration-law, arbitration-related litigation, this article, or any other legal-related matter, you can contact Phil Loree Jr. at (516) 941-6094 or at PJL1@LoreeLawFirm.com.

ATTORNEY ADVERTISING NOTICE: Prior results do not guarantee a similar outcome.

Photo Acknowledgment

The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law. Loree & Loree added text to this photo.

Venue and Hearing Procedure | Application to Compel Arbitration | Businessperson’s Federal Arbitration Act FAQ Guide | Nuts and Bolts of Pre-Award Federal Arbitration Act Practice under Sections 2, 3, and 4 (Part IV)

April 27th, 2020 Application to Compel Arbitration, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Businessperson's FAQ Guide to the Federal Arbitration Act, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 4, Federal Courts, Federal Rules of Civil Procedure, Motion to Compel Arbitration, Nuts & Bolts: Arbitration, Personal Jurisdiction, Petition to Compel Arbitration, Practice and Procedure, Small Business B-2-B Arbitration 2 Comments »
hearing procedure venue

This segment of the Businessperson’s Federal Arbitration ACT FAQ Guide focuses on the venue and hearing procedure aspects of compelling arbitration under Section 4 of the Federal Arbitration Act.  

The last instalment discussed the following FAQ related to Section 4 applications to compel arbitration: “What Papers Comprise an Application to Compel Arbitration and how are they Served?”

This segment addresses two FAQs:

  1. How does a Federal Court “Hear” an Application to Compel Arbitration?  
  2. In what Federal Court may an Application to Compel Arbitration be Filed?

Introduction: Section 4 and its Component Parts

As explained in our prior posts, Section 4 consists of 386 words jammed into a single paragraph, but it is easier to digest and follow if we divide it into subparagraphs or subsections, which we do below, using bold and bracketed text: 

[(a) Who may Petition what Court When and for What.] A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.

[(b) Notice and Service of Petition.] Five days’ notice in writing of such application shall be served upon the party in default. Service thereof shall be made in the manner provided by the Federal Rules of Civil Procedure.

[(c) Hearing Procedure and Venue.] The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed. If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.

[(d) Jury Trial, where Applicable] If no jury trial be demanded by the party alleged to be in default, or if the matter in dispute is within admiralty jurisdiction, the court shall hear and determine such issue. Where such an issue is raised, the party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of application, demand a jury trial of such issue, and upon such demand the court shall make an order referring the issue or issues to a jury in the manner provided by the Federal Rules of Civil Procedure, or may specially call a jury for that purpose.

[(e) Disposition upon Trial.] If the jury find that no agreement in writing for arbitration was made or that there is no default in proceeding thereunder, the proceeding shall be dismissed. If the jury find that an agreement for arbitration was made in writing and that there is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.

9 U.S.C. § 4 (bold and bracketed text added).

How does a Federal Court “Hear” an Application to Compel Arbitration?

What we refer to as “Section 4(c)” provides that “[t]he court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.” But, Section 4 continues, “[i]f the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.” 9 U.S.C. § 4.

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Arbitration FAQs: When is an Arbitrator Considered Neutral in a Federal-Arbitration-Act-Governed Arbitration?

April 16th, 2020 Arbitration and Mediation FAQs, Arbitration Law, Arbitration Practice and Procedure, Arbitrator Selection and Qualification Provisions, Businessperson's FAQ Guide to the Federal Arbitration Act, Challenging Arbitration Awards, Ethics, Evident Partiality, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 10, Grounds for Vacatur, Judicial Review of Arbitration Awards, Small and Medium-Sized Business Arbitration Risk, Small Business B-2-B Arbitration, United States Court of Appeals for the Second Circuit, Vacate Award | Evident Partiality, Vacatur No Comments »
neutral neutrality evident partiality

Single arbitrators are required under the Federal Arbitration Act to be neutral unless the parties otherwise agree. See, e.g., Morelite v. N.Y.C. Dist. Council Carpenters, 748 F.2d 79, 81-85 (2d Cir. 1984). In tripartite arbitration, one arbitrator (usually designated the umpire or chair) is ordinarily required to be neutral, while party-appointed arbitrators are presumed to be non-neutral, except to the extent otherwise required by the parties’ arbitration agreement. See Certain Underwriting Members London v. Florida Dep’t of Fin. Serv., 892 F.3d 501, 510-11 (2d Cir. 2018); Sphere Drake Ins. v. All American Life Ins., 307 F.3d 617, 622 (7th Cir. 2002); Trustmark Ins. Co. v. John Hancock Life Ins. Co. (U.S.A.), 631 F.3d 869, 872-74 (7th Cir. 2011). Arbitration provider rules, which may govern arbitrator qualifications in appropriate cases, often provide that all three arbitrators of a tripartite panel are required to be neutral.

Section 10(a)(2) of the Federal Arbitration Act—which authorizes federal district courts to vacate arbitration awards “where there was evident partiality…in the arbitrators…”—imposes in part and enforces these neutrality requirements. Section 10(a)(2) establishes that parties who agree to arbitrate can legitimately expect that neutral arbitrators will meet a certain minimal standard of arbitral impartiality, and that arbitrators not appointed as neutrals can, in appropriate circumstances, be held to a substantial, material breach of a stipulated arbitrator qualification requirement related-to, but not necessarily coextensive with, neutrality. See Certain Underwriting Members, 892 F.3d at 510-11; Sphere Drake, 307 F.3d at 622; Trustmark, 631 F.3d at 872-74.

The requirement that an arbitrator be “neutral” can be divided into three, distict  components. The arbitrator must be (a) impartial; (b) disinterested; and (c) independent.

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Provider Rules: Should I Agree to Arbitrate under Them?

March 23rd, 2020 American Arbitration Association, Arbitrability, Arbitrability | Clear and Unmistakable Rule, Arbitrability | Existence of Arbitration Agreement, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitration Providers, Arbitration Risks, Arbitrator Selection and Qualification Provisions, Authority of Arbitrators, Businessperson's FAQ Guide to the Federal Arbitration Act, Clear and Unmistakable Rule, Delegation Agreements, Drafting Arbitration Agreements, Evident Partiality, Existence of Arbitration Agreement, FAA Chapter 1, First Options Reverse Presumption of Arbitrability, Gateway Disputes, Gateway Questions, Practice and Procedure 1 Comment »
provider rules

Should your business agree to arbitrate under arbitration provider rules? Well, that depends.

Ideally, you should review those rules to see what they say, and discuss them with a knowledgeable and experienced arbitration attorney, or perhaps with another businessperson who has meaningful experience arbitrating under them. If, after doing your due diligence, you’re satisfied with the rules, understand how they might materially affect your arbitration experience, and are prepared to accept the consequences, then you may want to agree. If not, then you need to consider other options.

Granted, most of us do not bother to review arbitration rules before agreeing to arbitrate, or even to consult briefly with someone who is familiar with how they work in practice. And that can lead to some surprises, some of which may be unpleasant.

Here’s a nonexclusive list of a few things to keep in mind when considering whether to agree to arbitrate under arbitration provider rules:

  1. Agreeing to arbitrate under arbitration rules generally makes those rules part of your agreement, which means they are binding on you like any other part of your arbitration agreement;
  2. Arbitration provider rules generally provide that “arbitrability” issues—i.e., issues about the validity, enforceability, or scope of the arbitration agreement—must be decided by the arbitrator, not the court;
  3. They will govern not only the procedures to be used in the arbitration, but key substantive issues, such as arbitrator selection, arbitrator qualifications, and the number of arbitrators;
  4. They may empower the arbitration provider to resolve, at least in the first instance, questions about arbitrator impartiality, questions that one would otherwise reasonably expect were within the exclusive province of a court;
  5. They may determine whether your arbitration is placed on an expedited or complex-case track; and
  6. They may contain information about arbitration provider fees, which may be steeper than you anticipated.

And this list is by no means comprehensive.

Do any of these things really matter in business arbitration? They do, and to take but a single example, let’s look at how agreeing to provider rules may result in your business forefeiting its right to have a court decide disputes about the validity, enforceability, or scope of the arbitration agreement.

Continue Reading »

Stay of Litigation | Waiver of Arbitration | The Businessperson’s Federal Arbitration Act FAQ Guide III | Pre-Award Litigation under Chapter 1 of the Federal Arbitration Act | Litigating Gateway Disputes | The Nuts and Bolts of Pre-Award Federal Arbitration Act Practice under Sections 2, 3, and 4 (Part I)

February 16th, 2020 Arbitrability, Arbitrability | Clear and Unmistakable Rule, Arbitration and Mediation FAQs, Arbitration Law, Arbitration Practice and Procedure, Businessperson's FAQ Guide to the Federal Arbitration Act, Challenging Arbitration Agreements, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Gateway Disputes, Gateway Questions, Moses Cone Principle, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure, Questions of Arbitrability, Section 3 Stay of Litigation, Small Business B-2-B Arbitration, Stay of Litigation, Stay of Litigation Pending Arbitration, United States Court of Appeals for the Second Circuit, United States Court of Appeals for the Seventh Circuit 2 Comments »
Section 3 Stay of Litigation

Today we’re going to focus on Section 3 of the Federal Arbitration Act, which authorizes a Court to stay litigation.

In the last segment of this series we answered the following FAQs about how gateway disputes are decided by courts and arbitrators:

  1. What is the Presumption of Arbitrability?
  2. Does the Presumption of Arbitrability Apply to all Questions of Arbitrability?
  3. What Law Applies to Determine Gateway Disputes about Arbitrability to which the Presumption of Arbitrability does not Apply?
  4. How is the Presumption of Arbitrability Applied to Resolve Gateway Questions about the Scope of an Arbitration Agreement?
  5. What Defenses, if any, Can Parties Assert against Enforcement of an Arbitration Agreement, and what Law Governs these Defenses?

The answers to these questions, along with those provided in prior segments, were designed to provide you with a solid foundation for understanding how pre-award Federal Arbitration Act litigation works and what to expect if your business is or becomes embroiled in it.

The segment of which this post is Part I answers FAQs about the nuts and bolts of pre-award Federal Arbitration Act practice and procedure under Sections 2, 3, and 4 of the Act, the Sections that address gateway disputes about whether arbitration should proceed.

In this Part I we address the following FAQs, which focus on Section 3 stays of litigation:

  1. What Gateway Disputes do Sections 2, 3, and 4, Address, and How do they Address them?  
  2. How does Section 3 Work in Practice?

Future parts of this segment will address questions concerning Section 4 of the Federal Arbitration Act, which authorizes courts to compel arbitration. And we’ll move forward from there.

What Gateway Disputes do Sections 2, 3, and 4, Address, and How do they Address them?   

Section 2, as we’ve said, is the enforcement command of the Federal Arbitration Act, which deems all arbitration agreements falling within its scope to be “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. (See here and here.) Section 2 requires, as a matter of federal law, that arbitration agreements falling within its scope are to be enforced to the same extent as contracts generally. (See here.)  

But the Federal Arbitration Act does more than require the enforcement of arbitration agreements by putting them on “an equal footing with all other contracts.” Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1424 (2017) (quotations and citations omitted). It provides for specific performance of arbitration agreements, both in the form of an order staying litigation of an arbitrable controversy under Section 3 of the FAA, and an order directing a party to proceed with arbitration in accordance with their agreement. 9 U.S.C. §§ 3 & 4.

Continue Reading »

The Businessperson’s Federal Arbitration Act FAQ Guide III: Pre-Award Litigation under Chapter 1 of the Federal Arbitration Act—Gateway Disputes about Whether Arbitration Should Proceed (Part II)

February 4th, 2020 Arbitrability, Arbitrability | Clear and Unmistakable Rule, Arbitrability | Existence of Arbitration Agreement, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Authority of Arbitrators, Businessperson's FAQ Guide to the Federal Arbitration Act, Enforcing Arbitration Agreements, FAA Chapter 1, FAA Preemption of State Law, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Federal Policy in Favor of Arbitration, First Principle - Consent not Coercion, Gateway Disputes, Gateway Questions, McCarran-Ferguson Act, Moses Cone Principle, Practice and Procedure, Pre-Award Federal Arbitration Act Litigation, Presumption of Arbitrability, Procedural Arbitrability, Questions of Arbitrability, Small Business B-2-B Arbitration, Stay of Litigation, Substantive Arbitrability 2 Comments »
gateway disputes

Gateway disputes, which concern whether parties are required to arbitrate a dispute on the merits, are the principal subject of pre-award Federal Arbitration Act litigation. In the last segment of this series, Gateway Disputes about Whether Arbitration Should Proceed (Part I), we answered a number of FAQs concerning gateway disputes, including who gets to decide those disputes:  

  1. What is the Difference between Pre-Award and Post-Award Litigation under the Federal Arbitration Act?
  2. What are Gateway Questions?
  3. Who Decides Gateway Questions?
  4. How do Parties Clearly and Unmistakably Agree to Submit Questions of Arbitrability to Arbitrators?
  5. Are there any Arbitrability Disputes that Courts Decide when the Contract at Issue Clearly and Unmistakably Provides for the Arbitrator to Decide Questions of Arbitrability?

Today we’ll answer some more FAQs about how gateway disputes are decided (or at least are supposed to be decided) by courts and arbitrators:

  1. What is the Presumption of Arbitrability?
  2. Does the Presumption of Arbitrability Apply to all Questions of Arbitrability?
  3. What Law Applies to Determine Gateway Disputes about Arbitrability to which the Presumption of Arbitrability does not Apply?
  4. How is Presumption of Arbitrability Applied to Resolve Gateway Questions about the Scope of an Arbitration Agreement?
  5. What Defenses, if any, Can Parties Assert against Enforcement of an Arbitration Agreement, and what Law Governs these Defenses?

The answers to these questions, along with the answers provided in Part I, will provide you with a solid foundation for understanding how pre-award Federal Arbitration Act litigation works and what to expect if your business is or becomes embroiled in it. The next segment will answer FAQs about the nuts and bolts of pre-award Federal Arbitration Act practice and procedure under Sections 2, 3, and 4 of the Act.

What is the Presumption of Arbitrability?

Back in 1983 the U.S. Supreme Court, in the landmark decision Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983), famously declared that “[t]he [Federal] Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” 

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