Appeals of Arbitration Awards in Florida
Despite the popularity of arbitration, its future may be in doubt. Arbitration frequently fails to live up to its hype as a “speedy and economical” substitute for litigation, especially in the more complexed cases. Arbitration is a creature of contract and is essentially what the parties to the contract make it. This blog will discuss Appeals of Arbitration Awards.
The American Arbitration Association (“AAA”) has been the spear head in both form and substance regarding domestic and international arbitration. Founded in the 1920’s, its purpose was to develop arbitration as an adjunct to the courts. Through a network of regional offices, AAA administers commercial arbitrations as well as other forms of dispute resolution like mediation. Those parties in favor of arbitration over litigation claim its flexibility, informality, speed, economy, expertise in the fact finders and finality are more desirable. On the other hand, there appears to be growing number of critics challenging these perceptions.
Formal rules of evidence and procedure are avoided. Arbitrators are given considerably more flexibility in formulating the remedies and may tailor relief to fit the circumstances, not bound by legal or equitable considerations but only by their own sense of justice and fairness. As parties generally do not provide for the rules of arbitration within the arbitration clause in their contracts, frequently the clauses simply reference the Rules of the AAA for the particular cause, commercial; construction, etc. Arbitrators are given the power to interpret and apply the rules, their own jurisdiction, determine what evidence is necessary, admissible and relevant, without conforming to the legal rules of evidence or the law and without requiring a written rational for their award.
Under the Florida Arbitration Code, Chapter 682, Florida Statutes, an appeal may only be taken from: 1) an order granting or denying a motion to compel arbitration; 2) an order conforming, denying, modifying or vacating (without directing a rehearing) an award; and 3) a judgment or decree entered pursuant to this chapter. Appellate review is available only if the award was procured by fraud, corruption or “other undue means;” evident partiality, corruption or prejudicial misconduct by an arbitrator; the abuse of the arbitrator’s discretion in conducting the hearing or the arbitrator exceeded his/her/their powers. Additionally, an appeal may be taken if there was no agreement to arbitrate or the arbitration was conducted without proper notice. Conspicuous by its absence is any right to appeal because the arbitrator or panel failed to follow the law or misapprehended the facts.
In November 2013, the AAA recognized the concern of participants regarding the limited right of review of arbitrator’s decisions and promulgated “Optional Appellate Arbitration Rules.” The appellate rules provide for two (2) grounds for appeal: 1) an error of law that is material and prejudicial; or 2) determinations of fact that are clearly erroneous, with a notice of appeal being filed within thirty (30) days of the underlying award. The appellate process is substantially similar to the arbitration process to the extent of a filing fee of $6,000 to initiate the appeal, the three (3) member appellate panel is selected in a similar manner, the panel decides its own jurisdiction, interpret and apply the AAA rules and no oral argument unless directed by the panel. Within thirty (30) days of the last brief, the appellate panel may: 1) adopt the underlying award; 2) substitute its award for the underlying award; or 3) request additional information and notify the parties of the tribunal’s exercise of an option to extend the time to render a decision, not to exceed thirty (30) days. The appellate panel may not order a new arbitration hearing or send the case back to the original arbitrator(s) for corrections or further review, as an appellate court, but make the final decision on appeal as set forth above.
While the Appellate Rules allows for a wider review of issues, especially directed to the application of law and fact by the initial arbitration panel, as arbitration is a creature of contract, the contract must also include the right to appellate review. Use of the Optional Appellate Arbitration Rules are unavailable unless provided for within the contract between the parties. Assuming the contract has the standard AAA language, the following should be considered for “Other Clauses” and as the AAA suggests adding:
“Notwithstanding any language to the contrary in the contract documents, the parties hereby agree: that the Underlying Award may be appealed pursuant to the AAA’s Optional Appellate Arbitration Rules (“Appellate Rules”); that the Underlying Award rendered by the arbitrator(s) shall, at a minimum, be a reasoned award; and that the Underlying Award shall not be considered final until after the time for filing the notice of appeal pursuant to the Appellate Rules has expired. Appeals must be initiated within thirty (30) days of receipt of an Underlying Award, as defined by Rule A-3 of the Appellate Rules, by filing a Notice of Appeal with an AAA Office. Following the appeal process the decision rendered by the appeal tribunal may be entered in any court having jurisdiction thereof.”
While it is advisable to discuss arbitration verses litigation with your attorney during the drafting of an agreement, if arbitration is the sole method for resolving disputes, the above paragraphs should be requested to provide a greater review of the ultimate Award. The purpose of which is to insure there is at least the potential for a review of the Award based on the misapplication of the law or the erroneous determination of facts, in addition to the limited possibilities for review provided by law.
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