Non-Judicial Appeals: The Option Almost Nobody Knows About
Chances are good that you’ve had this experience: The arbitration is over, the arbitrator or arbitrators have made an award, and your client is not happy. “I want to appeal!” he laments. Patiently, you repeat what you had said in the beginning—that “binding arbitration” means just that. Any appeal to the courts is next to impossible unless you have proof of some pretty extreme behavior on the part of an arbitrator. Under the Federal Arbitration Act, without something akin to fraud or corruption, you had better be able to prove your client’s rights have been prejudiced by an arbitrator’s misconduct or that the arbitrators exceeded their powers or executed them so imperfectly that no final award was actually made. (See 9 USC § 10(a).) Such a high bar tends to prevent judicial appeals of arbitration awards under all but the most egregious circumstances.
But there may be another option. If the arbitration has been conducted under the auspices of AAA (the American Arbitration Association) or JAMS (once known as Judicial Arbitration and Mediation Services, Inc.), a non-judicial appeal may be available. The rules of both associations now recognize the possibility, which has been on the books at JAMS since its Optional Arbitration Appeal Procedure became effective in June 2003. AAA took longer to incorporate the concept, but its more detailed Optional Appellate Arbitration Rules took effect November 1, 2013.
Now that these rules have been in effect for 4+ years (AAA) or 14½ years (JAMS), how have they been received, and how are they working? When I set out to answer those questions, I initially thought my task would be simple: Just ask a dozen or so lawyers with experience in construction law, ADR, and appeals, and let them talk.
Well, I tried that, but the silence was deafening. Perhaps I just asked the wrong lawyers, but a varied group of experienced attorneys in four states (Kentucky, Ohio, Tennessee, and Alabama) professed to have no experience with appealing arbitration awards outside the courts.
How to account for this phenomenon? There are several possibilities:
- The arbitrators have done such an excellent job recently that even the losers realize an appeal would be a waste of time and resources.
- After a disappointing ADR experience, more unhappy participants prefer to take their chances with the court system, either by petitioning to have the award vacated, modified or corrected (under 9 U.S. Code §§ 10, 11) or by challenging the victor’s application to have the award confirmed (under 9 U.S. Code § 9).
- Recent arbitrations have been so intense that all participants are too exhausted to carry on the battle, and “finality,” no matter how disappointing, looks better than the alternative.
But perhaps there is a simpler explanation—perhaps too many of us are unfamiliar with the rules changes, and we have repeatedly told our clients that appealing an arbitrator’s decision is virtually impossible. Perhaps we have convinced ourselves that is still the truth.
Is it? Maybe; maybe not. Reviewing the rules for AAA and JAMS should clarify the situation as it stands today. Here are some Questions and Answers (not FAQs, because they haven’t been asked frequently enough to be FAQs) that should help us to understand the options.
Q: What are the prerequisites for a non-judicial appeal?
A: Under JAMS Rules: There must be a final award that was rendered under the JAMS Arbitration Rules, and all parties must have agreed to follow the Optional Arbitration Appeal Procedure.
A: Under AAA Rules: The Underlying Award can have been rendered under the auspices of AAA or the International Center for Dispute Resolution or at least under an arbitration clause providing that AAA’s Optional Appellate Arbitration Rules will apply. The parties must have agreed, “by stipulation or in their contract,” that the Underlying Award can be so appealed; such an agreement effectively incorporates these Rules as they exist on the date the appeal was submitted.
Comment: It is easy to imagine the difficulty of getting the necessary agreement to an appeal once the award has been made. Unless all parties see something in the award they just can’t stand, there will be no meeting of the minds. So any such agreement needs to be hammered out in advance, preferably before any contract is even signed, when no one anticipates any disagreement leading to arbitration or an appeal. Even at that early stage of the relationship, agreeing to permit an appeal—potentially wiping out some of the advantages of ADR, such as speed, economy, and particularly finality—may be difficult. It may help to point out that one major advantage—confidentiality—would still be maintained. And finality is a two-edged sword, sometimes desirable, sometimes not.
Q: What does a non-judicial appeal cost?
A: Under AAA Rules: The current non-refundable filing fee is $6,000. Of course, this does not cover the fees paid to the appellate arbitrator or arbitrators.
Comment: The JAMS Rules are silent as to fees, but JAMS informed me its filing fee is $1,500.
Q: What are the timelines for each type of appeal?
A: Under JAMS Rules: (1) Within 14 days of an award’s becoming final, notice of an appeal should be filed with the Case Manager. (The Rules don’t say, but this appears to be the Case Manager who managed the original JAMS arbitration.) The “notice” can take the form of a letter as long as it specifies what elements of the Award are being appealed and briefly states the basis for the appeal. (2) Cross-Appeals, if any, are due 7 days later. (3) “Upon the filing of an Appeal” (time not specified), the Case Manager recommends an Appeal Panel of three neutrals (or one, if the parties agree), and the parties have 7 days to agree or have the Case Manager unilaterally appoint the neutral(s). (4) Appeals can be decided on the record and briefs, but if all parties want oral argument, they will get it. The Appeal Panel can also request oral argument on its own. (5) Unless there is good cause for an extension, the decision (“a concise written explanation, unless all Parties agree otherwise”) will be issued within 21 days of oral argument, submission of the last brief, or the receipt of any new evidence, whichever comes last. Note that new evidence may only be considered if the appeal is based on the Arbitrator’s keeping out certain evidence or the Appeal Panel finds good cause to re-open the record. Otherwise, the record on appeal is limited to previously accepted evidence. (6) It is difficult to estimate the total duration of an appeal under these rules, as the time for submitting briefs is vague; there is to be a briefing schedule, either agreed by the Parties or set by the Case Manager, when agreement can’t be reached. But the duration of that briefing schedule might vary widely.
A: Under AAA Rules: (1) Once the Underlying Award has been submitted to the parties, the party wishing to appeal has 30 days to file the notice of appeal. (2) Requirements for notices are similar to those in JAMS, but they should also include the filing fee and a statement about the number and desired qualifications of the appellate arbitrators. (3) Cross-Appeals, if any, should be filed 7 days after the filing of the Notice. (4) Once AAA receives the Notice, it sends out a list of 10 potential arbitrators from the AAA’s Appellate Panel; Parties have 14 days to strike names and rank those remaining. AAA then selects the Arbitrators (or a single Arbitrator, if the parties have so agreed). (5) When the Arbitrators have been chosen, they have one week to schedule a conference call that, among other tasks, will develop a briefing schedule. (6) Briefing is generally finished within 62 days after the Notice of Appeal (83 days, if there is a Cross-Appeal). (7) There is usually no oral argument, but within 30 days of the Notice of Appeal, the Parties can ask for one. If they get it, oral argument must occur within 30 days of the filing of the last brief. (8) The tribunal’s decision is due 30 days after the last brief has been filed or the oral argument has concluded. (9) The whole appeal process is designed to be complete in about three months—obviously, much faster than the 1½-to-2 years the average judicial appeal may take.
Q: What is the record on appeal?
A: Under JAMS Rules: The record consists of “the stenographic or other record of the Arbitration Hearing and all exhibits, deposition transcripts and affidavits” that were part of the record for arbitration.
A: Under AAA Rules: Submitting only parts of the record from the arbitration hearing is acceptable. The Parties are to cooperate and may submit “relevant excerpts of the transcript of the arbitration hearing giving rise to the Underlying Award, if any, expert reports, deposition transcripts or affidavits that were admitted as part of the arbitration hearing.”
Comment: Obviously, having a transcript or some recording of the arbitration hearing is a boon to any Appellate Panel. It is difficult to see how an adequate review could occur without any such record, but the “if any” in the AAA Rules seems to open up that possibility.
Q: What restrictions are there on briefs?
A: Under JAMS Rules: The parties may choose to rely on the briefs previously submitted for the Arbitration hearing. If they choose to prepare new briefs, they are limited to 25 double-spaced pages. Letter-briefs are acceptable.
A: Under AAA Rules: Briefs are “limited to 30 double-spaced, typewritten pages.” Reply briefs of 10 pages are also permitted.
Comment: Although JAMS did not specify “typewritten,” that probably goes without saying.
Q: What standards of review apply?
A: Under JAMS Rules: “The Appeal Panel will apply the same standard of review that the first-level appellate court in the jurisdiction would apply to an appeal from the trial court decision.” Just as in the initial arbitration, the applicable rules of evidence are guiding principles but not followed strictly. There are three possible outcomes: affirming the award, modifying it, or reversing it. But a remand to the original arbitrator or arbitrators is not an option.
A: Under AAA Rules: The Introduction to the Rules specifies that the standard of review is “greater than that allowed by existing federal and state statutes.” Still, Rule A-10 limits the grounds for an appeal to two: “an error of law that is material and prejudicial,” or “determinations of fact that are clearly erroneous.” AAA arbitrators also have three choices—adopting the Underlying Award as their own, substituting a modified award for it, or “request[ing] additional information and notify[ing] the parties of the tribunal’s exercise of an option to extend the time to render a decision, not to exceed thirty (30) days.” No remand to the original panel is permitted, nor may there be a new arbitration hearing before a different panel.
Comment: A simple reversal is not permitted under the AAA Rules. If the appellate tribunal disagrees with the Underlying Award, it must issue its own, keeping only so much of the original as it finds unobjectionable.
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This discussion is clearly just Arbitration Appeals 101. But I know you are out there somewhere—construction lawyers who have actually been through the process and can speak with some authority. Without revealing any secrets or names of clients, can you share some of your experiences with me? The rest of us would truly be interested, and I look forward to writing a sequel to this article in the near future to provide some guidance from the trenches. If you are willing to talk, just send your email address or phone number to me at firstname.lastname@example.org, and I will do the rest. Non-judicial appeals of arbitration awards may well be the wave of the future, and we will all need to know as much as possible about them.
Kentucky Fellow Maureen P. Taylor is an attorney at Conliffe, Sandmann & Sullivan in Louisville, Kentucky. Construction law, although a second career, merges several interests for Ms. Taylor. Her first career, as an English and journalism instructor in college, stressed her love of the written word but convinced her that she really wanted to write. She got that opportunity when, at age 44, she fulfilled a long-held dream by enrolling in law school at the University of Michigan, eventually serving as Executive Editor of The Michigan Law Review. Her legal career began in a large Kentucky firm where she honed her love of argument in almost every aspect of commercial litigation, including a couple of construction cases. Moving to Columbus, Ohio, she joined the construction department of Bricker & Eckler, where, in addition to practicing law, she founded and served as editor of a monthly electronic newsletter, ohioconstructionlaw.com, for nearly eight years. Returning to Louisville, at Conliffe Sandmann & Sullivan PLLC, she has continued to focus her practice primarily on construction. And where did that interest originate? Well, blueprint was her absolutely favorite class in seventh grade!