main image

Posts Tagged ‘Contract Drafting’

What Happens when Arbitrators Exceed Clear Limitations on their Authority?

October 24th, 2014 Arbitrability, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Attorney Fees and Sanctions, Authority of Arbitrators, Awards, Confirmation of Awards, Contract Interpretation, Drafting Arbitration Agreements, Grounds for Vacatur, Judicial Review of Arbitration Awards, New York State Courts, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure, Small Business B-2-B Arbitration, State Arbitration Law, State Arbitration Statutes, State Courts, United States Court of Appeals for the Second Circuit Comments Off on What Happens when Arbitrators Exceed Clear Limitations on their Authority?

One advantage of arbitration is that parties can define and delineate the scope of disputes they agree to submit to arbitration, the basis on which disputes  can or must be resolved and the scope of the arbitrator’s remedial powers. If parties impose clear limits on an arbitrator’s authority (usually by expressly excluding certain matters from arbitration or expressly providing that an arbitrator cannot or must grant certain remedies), then courts and arbitrators are supposed to enforce those limitations. See, e.g., Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp., 559 U.S. 662, 680-81 (2010).

Far too frequently, parties simply agree to a broad arbitration agreement that places no limitations on arbitral power, and when they end up on the wrong-end of an award they didn’t expect, they discover to their dismay that they have no judicial remedy. Whether or not they understood that at the time they agreed to arbitrate is, of course, irrelevant. The only relevant consideration is whether their agreement could be reasonably construed to grant the arbitrator that authority, even if it could also be reasonably construed to withhold it. See, e.g., Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995) (“when a court interprets such provisions in an agreement covered by the FAA, due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself resolved in favor of arbitration”) (quotation and citation omitted).

But suppose the parties take the time to consider whether they desire to limit arbitral authority, and their arbitration agreement unambiguously expresses an intention to limit arbitral authority to resolve certain disputes or impose certain remedies, or to expressly require that the arbitrators grant certain types of relief, such as fee shifting to a prevailing party. Should a court vacate the award if the arbitrator does not abide by the parties’ unambiguously expressed intentions?  Continue Reading »

David J. Abeshouse Guest Post: Don’t Be Penny-Wise and Pound-Foolish With Contract Law

April 20th, 2011 Drafting Arbitration Agreements, Guest Posts Comments Off on David J. Abeshouse Guest Post: Don’t Be Penny-Wise and Pound-Foolish With Contract Law

By David J. Abeshouse

Perhaps I shouldn’t be telling you this (you’ll see why in a moment), but I think you ought to know. 

Many start-ups, professional practices, and other small businesses lack line-items in their budgets for legal representation.  But they place themselves (and their owners) in considerable peril when they forego having solid written business agreements.  Owners of businesses and professional practices often assume that they have workable understandings with their vendors, associates, and partners.   These assumptions often are misguided, because even the process of negotiating an agreement reveals possible future pitfalls and misconceptions that should be addressed now, before they become mortal issues.  Lack of a written agreement often means there hasn’t been a true meeting of the minds. 

Absent a well-written agreement, all too often something goes very wrong, and then there’s hell to pay in terms of cost, disruption, risk, and other adverse consequences (such as court litigation) of failing to have solid written agreements in place.  Having the right business agreements in place is not an absolute guarantee that you’ll be able to avoid misunderstandings, but it helps protect you and your business or professional practice.

Here’s part of the problem: When faced with legal issues, many try the DIY (do-it-yourself) route, figuring that they’re smart, experienced business people, and therefore should be able to modify old contract forms, and/or find sample contractual provisions online, and cobble them together into a workable agreement.  Some of the pitfalls with this approach, however, include that many aspects of the law aren’t intuitive, many words have legal meanings different from their common meanings, various contractual provisions interact differently in different circumstances, and the education and experience of lawyers trained in the area of drafting contracts should not be lightly ignored.  DIY-ers usually find themselves in a situation akin to steering a rudderless ship, or trying to fix electric wiring or plumbing without the right knowledge or tools.  The results (misdirection, shock, and flood) are the same, and the hapless business owner ultimately pays a far greater price down the road in terms of liability, disruption, business risk, and yes, eventual expenditure of legal fees. 

I can speak neutrally (and I hope informatively and compellingly) on this because I’m not the lawyer who drafts the agreements for the professional practices and other businesses, so I have no self-interest here.  Instead, I’m either the lawyer who represents one side or the other in litigation or arbitration, after something goes wrong and there’s a disagreement that’s not governed by a customized written contract (employment agreement, shareholders agreement, LLC operating agreement, vendor-vendee agreement, services agreement, etc.); or I’m the one who serves as impartial neutral arbitrator or mediator of the dispute. 

I all-too-often litigate the results of the parties’ failure to have well-conceived and well-drafted business contracts.  So, to help avoid having to consult with me, hire the lawyers who can help craft a solid written business agreement for you.  It’s good preventive legal medicine. 

The author is a Business Litigator, Arbitrator, and Mediator in Uniondale, Long Island, NY. He can be reached through his website here or at 516-229-2360. 

© 2011 David J. Abeshouse

[Editor’s Note:  This post was originally published in the Basso on Business Blog and is reproduced with permission here.  For more information about the author, read “Introducing Guest Blogger David J. Abeshouse,” here.]  

Introducing Guest Blogger David J. Abeshouse

April 20th, 2011 Drafting Arbitration Agreements, Guest Posts Comments Off on Introducing Guest Blogger David J. Abeshouse

Today’s guest blogger, David J. Abeshouse, is a Long Island based B-2-B litigator, American Arbitration Association (“AAA”) arbitrator, and mediator.  David and I are good friends and members of the Attorney Roundtable, a networking group that features some leading Long Island based practitioners in a number of different practice areas, all of whom practice solo or in small, boutique firms.  David is one of the founding members of the group.  He’s also an accomplished clarinet player and a former professional musician. 

David’s legal and alternative dispute resolution (“ADR”) practice focuses on litigations, arbitrations and mediations involving small and medium-sized businesses and professional practices.  Because he serves not only as an advocate, but also as a neutral decision maker and settlement facilitator, he has a broad-based, well-rounded perspective on — and unique insights about —  commercial disputes.  You can read more about David’s practice and background here.

David and I share many of the same views on key issues pertinent to B-2-B ADR and litigation.  We both believe that the parties are architects of their own dispute resolution destiny, and, if they wish to take advantage of the many benefits that B-2-B arbitration and mediation can offer, then it is incumbent upon them to take a proactive role in structuring the process in a manner that advances their business interests.  That is true whether the party is a large global insurer or reinsurer, a medium-sized financial service company or retail concern, or a small closely-held company or professional practice doing mostly local business.  Most large companies, and many medium-sized ones, know this and their sophisticated, in-house legal departments often devote substantial time and money into educating themselves about ADR and ensuring that their business contracts, including their ADR-related ones, are as carefully designed and well drafted. 

Smaller companies do not always have in-house the resources to prepare for and deal with disputes, even though disputes are one of the unfortunate realities of doing business.  And while the frequency and number of disputes small companies must handle is generally low, their severity can be quite high — even fatal. 

Dispute resolution and prevention is thus at least as important to smaller businesses as it is to large, multi-national companies.  Yet many smaller business devote few or no resources to dispute management.  

Sometimes this disparity in resource and risk allocation is a simple fact of economic life, including the law of large (and small) numbers.  In others it may evidence a conscious or unconscious decision to assume more risk than necessary or appropriate.  

Both David and I are experienced litigators who have seen firsthand the negative consequences that large, medium and small businesses can suffer as a result of poorly drafted contracts, including ADR-related contracts.  With the benefit of 20-20 hindsight we frequently wonder how it came to be that two business have found themselves in costly litigation or arbitration proceedings concerning a problem which might have been avoided had the parties more carefully drafted the contract or structured the transaction differently.  

This theme underscores David’s guest post, “Don’t Be Penny Wise and Pound Foolish with Contract Law,” which he originally published in the Basso on Business Blog.  Consider it recommended reading for those who own or work for small businesses. 

David has written two other, related articles that we will feature in the not-too-distant future, so stay tuned.