Know the Rules for Appeal of an Arbitration Ruling

By Jill R. Johnson

This is the second in a three-part series.Find part one here.

Businesses in construction continue to review how game-changing rules in arbitration will affect them. In November 2013, the American Arbitration Association (AAA) and the International Centre for Dispute Resolution adopted new rules that potentially remove the finality of initial arbitration decisions. Called the Optional Appellate Arbitration Rules, decisions reached under contracts that include this clause can be overturned on review by an AAA appellate panel of three neutrals. Grounds for overturning a decision include situations involving alleged “material and prejudicial” errors of law and/or “clearly erroneous” determinations of fact. The application of the new rules is optional, and must be agreed to by all parties (typically in a contract). Parties should, therefore, carefully review any arbitration provisions in their contracts to determine whether they contain an agreement to permit the appeal of an award. The new rules also make keeping a record of arbitration proceedings almost essential in order to properly document an appeal.

While this might seem like it makes arbitration more like a conventional appellate court process, there are important differences and the process is extremely efficient compared to the courts. To initiate an appeal, the appellant must file a Notice of Appeal within 30 days from the date the underlying award is submitted to the parties. One of the next steps is to select an appellate tribunal of three neutrals from an AAA-approved list of former judges or other neutrals with substantial appellate experience. There also are certain filing requirements, including payment of a non-refundable $6,000 deposit required by the appellant. Within one week of selecting the tribunal, the parties, case manager and tribunal must schedule a preliminary conference “to review and formalize the briefing schedule, set a deadline for the submission of the record on appeal and address any other procedural issues consistent with these rules and the objectives for an expedited, cost effective and just appellate process,” according to the AAA rules. There usually is no oral argument or hearing, meaning that the appeal will be determined by the documents presented to the tribunal.

The entire appeal, from the Notice of Appeal to the issuance of a decision, is designed to be completed within approximately three months, with the tribunal’s decision due within 30 days of the parties’ last written submission. This abbreviated schedule makes an arbitration inexpensive compared to a court appeal, but it is not without costs. In addition to the filing costs, the client will still have to pay additional fees for the neutrals, AAA administration and attorneys. There also is the cost of keeping a record of the original arbitration. Once the appellate tribunal renders its decision, that decision becomes the final award for purposes of judicial enforcement proceedings. Unlike a court appeal, the arbitration tribunal cannot remand a case to the original neutral. The tribunal can only confirm the original award or substitute a new, final award. The decision is final, with no appeal to a higher tribunal or any entity outside the arbitration process. Thus, it is a one-step appeal process with the certainty of being resolved by the appellate tribunal.

Jill R. Johnson is a commercial litigator with Chamberlain Hrdlicka (Atlanta), who counsels clients with construction and related disputes. She may be reached at (404) 588-3574 or [email protected].

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