W. D. of Pennsylvania Addresses Optional Appeal to Second Arbitration Tribunal
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It is very rare to see a court decision addressing whether an optional appeal to a second arbitration tribunal is available under the applicable arbitration agreement and arbitration rules to a party disappointed by a first tribunal’s arbitration award. In DeMuth v. Navient Solutions, LLC, Civ. Action No. 17-675 (W.D. Pa., August 15, 2017), though, Judge Nora Berry Fischer of the US District Court for the Western District of Pennsylvania ruled that the question of whether an appeal of an American Arbitration Association (“AAA”) arbitration award is available under the AAA Optional Appellate Arbitration Rules and the applicable arbitration clause is a matter for the appellate arbitral tribunal to decide, not the court.
The facts in DeMuth involve a student loan, an unusual arbitration clause referring in possibly contradictory terms to an appeal of a first instance arbitration ruling to a second, three-personal arbitration tribunal, the AAAConsumer Arbitration Rules and the AAA/ICDR Optional Appellate Rules. At bottom, Judge Fischerconcluded that “Pursuant to the complete arbitration rule, ‘a district court should not entertain such a lawsuit challenging [an] arbitration award until the arbitration is complete and the award is final.’ Verizon Pa. LLC v. Communs. Workers of Am., Local 1300 , 216 F. Supp. 3d 530, 538 (E.D. Pa. Oct. 20, 2016) (citing Union Switch & Signal Div. Am. Standard, Inc. , 900 F.2d at 610).” She continued by adding, “More significantly, it is not for this Court to determine which rules apply to Defendant’s appeal and whether the same is permissible.”
To help readers understand Judge Fischer’s Order, it is useful to know the details of Rule A-1 of the AAA/ICDR Optional Appellate Rules. Notably, Rule 1-A prevents appeals of consumer disputes under standardized, adhesive arbitration clauses: “where the arbitration clause is contained in an agreement between individual consumers and businesses where the business has a standardized, systematic application of arbitration clauses with customers and where the terms and conditions of the purchase of standardized, consumable goods or services are non-negotiable or primarily non-negotiable in most or all of its terms, conditions, features, or choices.”
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