Archive for the ‘Small Business B-2-B Arbitration’ Category

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Arbitration and Mediation FAQs: I Received an Arbitration Award in my Favor but my Adversary Refuses to Pay it. What can I do?

June 14th, 2014 Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Confirmation of Awards, Final Awards, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure, Small Business B-2-B Arbitration, State Arbitration Statutes, State Courts, Statute of Limitations Comments Off on Arbitration and Mediation FAQs: I Received an Arbitration Award in my Favor but my Adversary Refuses to Pay it. What can I do?

Favorable arbitration awards are wonderful things, but they are not self-enforcing. Sometimes the other side voluntarily complies, but if not, there is really not much of anything the arbitrator can do to help.

Arbitrators are not judges and thus do not have the authority to garnish wages, seize property,  foreclose on encumbered property, freeze bank accounts, impose contempt sanctions and so forth. Parties can delegate to arbitrators broad adjudicatory and remedial authority, but that is relevant only to the nature and scope of their awards, and does not confer power on the arbitrators to enforce their awards coercively.

Apart from its potential preclusive effect in subsequent litigation, an arbitration award stands on the same footing as any other privately prepared legal document, such as a contract. It may be intended by the arbitrators and at least one of the parties to have legal effect, but it is up to a court to say what legal effect it has, and,  if necessary, to implement that legal effect through coercive enforcement. A judgment, by contrast, is an official decree that not only can be coercively enforced through subsequent summary proceedings in the same or other courts (including courts in other states and federal judicial districts), but is, to some extent, self-enforcing. A judgment, for example, can ordinarily be filed as a lien on real property, and applicable state or federal law may, for example, authorize attorneys to avail their clients of certain judgment-enforcement-related remedies without prior judicial authorization.

But that doesn’t mean you’re out of luck; it means you need a court to enter judgment on the award, that is, to “confirm” it. Once an award has been reduced to judgment, it can be enforced to the same extent as any other judgment. See, e.g., 9 U.S.C. § 13 (Under Federal Arbitration Act, judgment on award “shall have the same force and effect, in all respects, as, and be subject to all the provisions of law relating to, a judgment in an action; and it may be enforced as if it had been rendered in an action in the court in which it is entered”); Fla. Stat. § 682.15(1)( “The judgment may be recorded, docketed, and enforced as any other judgment in a civil action.”); N.Y. Civ. Prac. L. & R. § 7514(a) (“A judgment shall be entered upon the confirmation of an award.”).

The Federal Arbitration Act (the “FAA”), and most or all state arbitration statutes, authorize courts to confirm awards in summary proceedings. State arbitration-law rules, procedures, limitation periods and the like vary from state to state and frequently from the FAA, and state courts may apply them to FAA-governed awards (provided doing so does not frustrate the purposes and objectives of the FAA).

But let’s keep things simple, and take a brief look at the FAA’s requirements for confirmation applicable in federal court when there is no prior pending action related to the arbitration, and  there are no issues concerning federal subject matter jurisdiction, personal jurisdiction, sufficiency or service of process, venue (i.e., whether suit should have been brought in another federal judicial district) or the applicability of the FAA.  We’ll also discuss how applications to confirm are supposed to be summary proceedings, why timing of an application is important, and how courts go about deciding them. Continue Reading »

Arbitration and Mediation FAQs: What do the Terms Arbitrable, Arbitrability, and Question of Arbitrability Mean, and Why do they Matter?

March 26th, 2014 Arbitrability, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Existence of Arbitration Agreement, Grounds for Vacatur, Practice and Procedure, Small Business B-2-B Arbitration, United States Supreme Court Comments Off on Arbitration and Mediation FAQs: What do the Terms Arbitrable, Arbitrability, and Question of Arbitrability Mean, and Why do they Matter?

 Arbitrable, Arbitrability and Question of Arbitrability

If you’ve ever been unfortunate enough to be privy to a conversation about arbitration law, you probably heard things like:

“The dispute arguably falls within the scope of the agreement and is therefore arbitrable.”

“Oxford expressly pointed out that none of the parties argued that consent to class arbitration is a question of arbitrability.”

“Did the parties clearly and unmistakably agree to arbitrate arbitrability? Because if they did, questions of arbitrability are arbitrable.”

Arbitration-law parlance is probably more arcane and cryptic than it has to be, but it has been with us for several decades and there’s no indication that it is likely to change any time soon. Learning it may be painful, but is usually well worth the modest effort required.

Today we’ll define in plain English some of the most bandied-about arbitration-law terms: “arbitrable,” “arbitrability” and “question of arbitrability.” And in the process we’ll try to explain why these closely-related terms are significant in matters governed by the Federal Arbitration Act (the “FAA”). Continue Reading »

Arbitration and Mediation FAQs: Should I Agree to Mediate Future Disputes Arising out of a Business Contract or Transaction?

March 22nd, 2014 Arbitration and Mediation FAQs, Drafting Arbitration Agreements, Drafting Mediation Agreements, Mediation, Mediation Agreements, Negotiation, Small Business B-2-B Arbitration, Small Business B-2-B Mediation Comments Off on Arbitration and Mediation FAQs: Should I Agree to Mediate Future Disputes Arising out of a Business Contract or Transaction?

Suppose you are a business entity or an individual negotiating a contract that contemplates an ongoing business relationship with another person or entity. You need to consider many things, not the least of which is what kinds of provisions, if any, you might want to include in your contract that deal with the contingency of one or more disputes arising in the future. You might decide, for example, to agree to arbitrate disputes. You might decide that arbitration is too risky in the circumstances and that you would rather have a court resolve your dispute, but that you nevertheless want to include provisions in your contract dealing with choice of law, choice of forum, permissible remedies and the like. These are all important decisions that need to made carefully and often with the help of an attorney having skill and experience in such matters.

But they are not the only things that you might consider or be asked by your counterpart to consider. Whether or not you agree to arbitrate, or to litigate but only in a particular forum under the law of a particular state, there is something else you might want or be asked to consider: an agreement to mediate future disputes arising out of or relating to the contract and the business relationship it creates.

Should you give such an agreement some serious thought? There is no single correct answer to that question because, like most other things, the devil is in the details. But, depending on the circumstances, an agreement to mediate as a precondition to judicial or arbitral dispute resolution might be a very good idea. Continue Reading »

Part II.B.2(B): Other Structural Aspects of Pre-Dispute Arbitration Agreements—Will the Arbitration be Administered or Ad Hoc?

January 8th, 2014 Arbitration Agreements, Arbitration Practice and Procedure, Making Decisions about Arbitration, Small Business B-2-B Arbitration Comments Off on Part II.B.2(B): Other Structural Aspects of Pre-Dispute Arbitration Agreements—Will the Arbitration be Administered or Ad Hoc?

Introduction

The last two segments of this Small Business B-2-B Arbitration series have focused on certain key structural aspects of pre-dispute arbitration agreements. Perhaps some might think that an examination of even the most basic structural components of arbitration agreements is too much information for a business person, but most successful business people know about all relevant aspects of the contracts they negotiate, not just the basic structural components of those contracts (e.g., price and performance terms).

Given that an arbitration agreement can fundamentally alter the risk-benefit calculus of a deal, one would naturally expect that successful business people would be familiar with at least the basic structural aspects of such agreements, but in our experience that is not necessarily the case. In fact, were it so, we would expect there would be far fewer arbitration-related disputes that could be traced back to a party’s un- or ill-informed decision about whether to agree to arbitrate, and if so, on what terms.

In Part II.B.2(A) we identified three key structural aspects of pre-dispute arbitration agreements and discussed the first—the scope of disputes to be arbitrated—in some detail. This Part II.B.2(B) briefly discusses the second: how an arbitration under the agreement will be administered and by whom. Continue Reading »

Small Business B-2-B Arbitration Part II.B.2(A): Other Structural Aspects of Pre-Dispute Arbitration Agreements—What am I Agreeing to Arbitrate?

January 2nd, 2014 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Drafting Arbitration Agreements, Making Decisions about Arbitration, Small Business B-2-B Arbitration Comments Off on Small Business B-2-B Arbitration Part II.B.2(A): Other Structural Aspects of Pre-Dispute Arbitration Agreements—What am I Agreeing to Arbitrate?

In the last installment of our B-2-B Arbitration series we focused on one of the most important structural aspects of pre-dispute arbitration agreements: the mutual promise to submit disputes to arbitration, what it means and how its performance by the parties through their post-dispute submission defines and delimits the scope of authority parties actually delegate—as opposed to promise to delegate—to arbitrators to resolve particular disputes.

But there are other important structural aspects of arbitration agreements about which business people should be mindful if they wish to make informed decisions about arbitration. While a comprehensive discussion of them would be far beyond the scope of this post, let’s focus briefly on arbitration-agreement terms that bear on the following questions: Continue Reading »

Improving Arbitration-Award Making and Enforcement by Faithfully Implementing the Purposes and Objectives of the Federal Arbitration Act

November 13th, 2013 Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, General, Grounds for Vacatur, Practice and Procedure, Small Business B-2-B Arbitration, United States Supreme Court Comments Off on Improving Arbitration-Award Making and Enforcement by Faithfully Implementing the Purposes and Objectives of the Federal Arbitration Act

Part II:

A Consent-Based Framework

for Making and Enforcing Arbitration Awards

Introduction

In Part I we argued that improving arbitration in general—and the award making and enforcement process in particular—requires persons with a stake in arbitration’s success to adjust how they think about arbitration. We also argued that the purposes and objectives of the Federal Arbitration Act (the “FAA”) provide a relatively simple analytical framework which, if consistently and properly applied, can help persons with a stake in arbitration’s continued success make decisions that should help facilitate the achievement of that goal.

This Part II discusses that analytical framework, which is based on United States Supreme Court interpretations of the FAA and its purposes and objectives. It posits that arbitration’s improvement and continued success as a dispute resolution mechanism for a broad range of disputes depends on it being an attractive alternative to litigation, and that arbitration can remain such an attractive alternative for a broad range of disputes only if courts, arbitrators, and parties fully and forthrightly accept that arbitration is a matter of contract, and that the awards that it yields should be freely and summarily enforced, provided that they represent a legitimate product of the agreement to arbitrate. Continue Reading »

Improving Arbitration-Award Making and Enforcement by Faithfully Implementing the Purposes and Objectives of the Federal Arbitration Act

November 12th, 2013 Arbitration Agreements, Arbitration Practice and Procedure, Awards, General, Judicial Review of Arbitration Awards, Small Business B-2-B Arbitration Comments Off on Improving Arbitration-Award Making and Enforcement by Faithfully Implementing the Purposes and Objectives of the Federal Arbitration Act

Part I:

An Introduction to the Problem and its Solution

Arbitration can be a very effective way of resolving a wide range of disputes arising out of many legal and commercial relationships. It can benefit the parties if they make informed decisions about agreeing to it, and craft their agreement accordingly. It can benefit the courts and the general public by shifting to the private sector dispute-resolution costs that the public-sector would otherwise bear.

Arbitration is not a perfect form of dispute resolution (and none is, including court litigation). That is so even when parties carefully draft their arbitration agreements, and the parties, arbitrators, arbitration service providers and courts do their best to ensure the integrity and reliability of the process and otherwise strive to protect the legitimate expectations of the parties. But at least over the last couple of decades or so, arbitration has, in the opinion of many, become a less attractive alternative to court litigation than it was intended to be, could be and once was. Continue Reading »

Small Business B-2-B Arbitration Part II.B: How Arbitration Agreements Work

October 17th, 2013 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Drafting Arbitration Agreements, Making Decisions about Arbitration, Practice and Procedure, Small Business B-2-B Arbitration Comments Off on Small Business B-2-B Arbitration Part II.B: How Arbitration Agreements Work

Part II.B.1: Delegating Authority

The Arbitration Agreement and the Submission

If you’ve followed this series from inception you already know that the decision to agree to arbitrate disputes arising out of a transaction, and if so, under what terms, can be as important as any other decision a business must make about price and performance terms. Armed with sufficient knowledge about how arbitration and arbitration-law works, business people and their lawyers can make better-informed choices about arbitration, including whether seeking advice from an attorney with arbitration and arbitration-law experience is warranted in the circumstances. All else equal, a business that makes informed choices about transaction terms—including dispute resolution terms—increases the odds that the transaction will work as the parties intended.

Knowledge of how arbitration agreements are structured and how they work is essential to appreciate the risks and benefits associated with arbitration. Part II.B of the series is designed to introduce the basics of pre-dispute-arbitration-agreement structure and function. This Part II.B.1 focuses on the nature of the pre-dispute promise to arbitrate, how that promise is implemented by the post-dispute submission and the nature and extent of the power parties delegate to an arbitrator by way of their submission. Continue Reading »

Small Business B-2-B Arbitration Part II.A: The Nature and Purpose of Arbitration

July 12th, 2013 Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, General, Making Decisions about Arbitration, Mediation, Negotiation, Practice and Procedure, Small Business B-2-B Arbitration Comments Off on Small Business B-2-B Arbitration Part II.A: The Nature and Purpose of Arbitration

The long- and short-term success of a business is generally measured by the economic benefits it produces for its investors.  Most business decisions require a business to accept risks of varying severity and frequency if the business is going to realize a meaningful return on investment.  All else being equal, to increase the likelihood that those decisions will yield profits, the business must accurately assess all material risks, their corresponding benefits and the interplay between the two.

The same holds true for the decision whether to make an arbitration agreement part of a business transaction, and if so, on what terms.  But in the author’s experience otherwise savvy and intelligent small-business-persons frequently view an arbitration agreement as a throw-in term that isn’t likely to affect materially the risk-benefit calculus of the transaction as a whole.  These business persons are therefore likely to agree to arbitrate with a more economically powerful counterpart without giving the matter much thought, let alone the careful thought they devote to the price and performance terms of the deal.  This approach, as a number of business people have learned the hard way over the years, can result in a very frustrating and potentially debilitating one-two punch:  dashed reasonable expectations coupled with very little, if any, meaningful judicial review. Continue Reading »

Small Business B-2-B Arbitration Part I: Introduction — Should we Make Arbitration Part of the Deal?

March 28th, 2013 Arbitration Agreements, Making Decisions about Arbitration, Small Business B-2-B Arbitration Comments Off on Small Business B-2-B Arbitration Part I: Introduction — Should we Make Arbitration Part of the Deal?

Small businesses (including sole proprietors) frequently must negotiate arms-length commercial transactions with their more economically powerful counterparts and,  not infrequently, must decide whether to accept an offer to make an arbitration agreement part of the deal.  Whether or not to accept that invitation, and, if so, under what terms, may seem like a straightforward question susceptible to an easy answer, and it can be tempting to think that the risks associated with making the wrong choice are minimal, even in the event that a dispute arises and a party demands arbitration.

Yet any businessperson who has found herself at the wrong end of an out-of-whack-but-unlikely-to-be-vacated arbitration award will surely question the validity of that assumption,  irrespective of whether she relied upon it when she agreed to arbitrate.  Arbitration can offer some significant benefits, but to achieve them one must accept some significant risks.  Whether or not to agree to it in the context of any particular deal is a decision requiring meaningful due diligence tailored to address the specifics of the contemplated transaction that may give rise to a dispute subject to arbitration. Continue Reading »

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