Part IIIA: Interpreting Section 2(c) of the Fairness Act to Apply to Domestic Arbitration Proceedings Involving Sophisticated, Commercial Entities
Introduction
In Part I we provided general background on the Arbitration Fairness Act of 2009 (the “Fairness Act”) and said it was likely to generate litigation over the allocation of power between courts and arbitrators in commercial arbitration proceedings involving sophisticated, commercial entities. In Part II we briefly discussed why litigation will likely occur if the Act becomes law.
In this Part IIIA we discuss what we call the “Broad Construction” of the Fairness Act, under which it is construed to abrogate in all commercial disputes: (a) the doctrine of severability; and (b) deferential review under Federal Arbitration Act (“FAA”) Sections 10 and 11 of arbitrator determinations of arbitrability in cases where the parties unambiguously submit arbitrability questions to the arbitrators. This construction would limit fairly significantly the power of arbitrators in commercial disputes involving sophisticated parties.
In Section IIIB we shall discuss the “Narrow Construction”, which would limit the scope of Section 2(c) to situations where the party resisting arbitration claims that the arbitration clause requires predispute arbitration of consumer, franchise, employment or civil rights disputes. This construction would not alter the allocation of power between courts and arbitrators in commercial disputes involving commercial entities.
[Note: We previously said we would cover both constructions in a single post. We have concluded, however, that it would be easier on our readers if we addressed each separately. ] Continue Reading »
