New AAA Rules Provide Straightforward Guidelines for Appeals
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The American Arbitration Association (AAA) has adopted rules, effective November 1, 2013, providing parties to commercial and construction arbitrations with an optional process for appealing an arbitration award. Except for the occasional inclusion of an ad hoc private appeal process in a contractual ADR provision, or unique state statutes, there have been limited opportunities for appellate review of the “merits” of arbitration awards.
With increasing frequency, parties dissatisfied with an arbitration award are seeking judicial review of their awards. The scope of that review is limited. In federal court, awards are only reviewed pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., and the limited statutory grounds set forth in the act. The grounds generally relate to the conduct of the arbitrator and include corruption, fraud, undue means, partiality, or other misconduct or fault. The FAA does not provide for review of the merits of an award, and contracting parties cannot confer jurisdiction on the federal courts to expand the scope of judicial review.
In cases where arbitration is governed by state law, states are split on whether parties can confer jurisdiction for review beyond statutory grounds. In the absence of parties including contractual provisions for expanded review, state court review is limited to the normally narrow grounds, like those included in the FAA, provided in their statutes.
New Jersey courts recognize that parties may expand the scope of judicial review of arbitration awards, Tretina Printing, Inc. v. Fitzpatrick & Associates, Inc. (135 N.J. 349, 1994). New Jersey is also unique in that parties may choose to proceed under one of two different statutes. The first, the New Jersey version of the Revised Uniform Arbitration Act,N.J.S.A 2A:23B-1, et seq., includes the traditional, narrow grounds for vacating, modifying, or overturning an award. The second, the Alternative Procedure for Dispute Resolution Act, N.J.S.A 2A:23A-1, et seq., permits expanded judicial review including review, inter alia, for errors of law.
The Optional Appellate Rules in Brief
The AAA Optional Appellate Rules (Rules) provide an easier, more standardized process for parties who desire an opportunity for a more comprehensive appeal of an arbitration award. The essence of the process is that parties can get a “review of errors of law that are material and prejudicial, and determinations of fact that are clearly erroneous.” As is the case with arbitration in general, the appeals process is not unilateral, but rather a matter of contract between the parties. In addition to permitting a broader review, the Rules keep the proceeding within the arbitral process, which provides greater confidentiality.
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