What is “arbitration”? Although courts often use and apply the word, rarely do they stop to define it.  While the FAA concerns agreements to “settle by arbitration a controversy,” the FAA does not define “arbitration,” leaving the question to the courts. Lacking definitive guidance from the U.S. Supreme Court, two lines of cases have developed among the U.S. Courts of Appeals.

The split can be traced back to AMF Inc. v. Brunswick Corp., where bowling lane companies agreed to submit disputes about advertising to a third party to determine whether the claims in the ads were supported. 621 F. Supp. 456 (E.D.N.Y. 1985). After ads from Brunswick claimed “high tech” superiority over AMF’s wooden lanes, the court set out to resolve whether the process detailed in the agreement was “arbitration.” The key language from the case is that the “essence of arbitration” is “to have third parties decide disputes.” The court concluded that the parties had agreed to arbitrate because at least one controversy — the factual issue of whether the advertising claim was supported — would be “settled.” “Arbitration” need not end all controversy between the parties, and with the factual dispute resolved it was “highly likely” that the litigation based on that factual dispute would also be resolved.

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