1. Federal Arbitration Act: 9 U.S.C.A. §1: governs the enforcement of agreements to arbitrate in contracts involving interstate commerce or maritime transactions:
a. Litigation: formal environment; courtroom w/ judge, court reporter, witnesses, attorneys, etc.
b. Mediation: three conference rooms. Opening conference, caucuses, effective? closing conference, ineffective? go to court.
i. An impartial party helps the parties to come to an agreement.
c. Arbitration: conference table. Arbitrator at head of table; each party on respective side.
i. An impartial party makes a binding (usually) decision based on the facts presented by each party.
3. Revocability Doctrine: denies specific performance in arbitration agreements. Active until 1920. In place because it was thought that the agreement to arbitrate was revocable by either party until the award was rendered.
a. Two justifications:
i. “ouster doctrine”: they didn’t want judges to oust people from the courts when they had the rights to be there.
ii. “limited-powers-of-equity rationale”: the judges couldn’t ensure that the arbitration process would be fair or equitable so they didn’t want to compel it.
4. Client benefits:
a. lower costs (and often the loser pays)
b. arbitrator may be an expert in your field and you get to pick your arbitrator
c. rules are flexible
e. discovery is limited
f. decisions are final and enforceable
g. oftentimes, the result of litigation doesn’t seem just to people in the business world
h. helps maintain the relationship after the arbitration
5. Client concerns:
a. who will the arbitrator be?
c. no precedent set
d. discovery is limited
6. Generally, arbitration is selected by agreement of the parties, either before or after a dispute has arisen.
7. Arbitration is mandated in several states for certain types of civil disputes, tort actions, and insurance claims.
8. SCT has recently expanded the reach of ADR agreement to apply not only to issues of contract formation, performance, and breach that may rise between contracting parties, but also disputes concerning statutory rights.
9. Chief Justice Burger believed that small cases are a good fit for community tribunal and large cases are better for arbitration.
10. Historical background:
a. Pre-1920, a court could not compel arbitration. You could get damages in the amount that you would have spent on the arbitration.
i. Tobey v. County of Bristol: courts didn’t want to compel arbitration because they would be depriving people of the rights that they were otherwise entitled to and they could not ensure fair arbitration. Also, you cannot force people to agree on something. Arbitration agreements must rest in the good faith and honor of the parties.
b. NY Arbitration Act of 1920: the foundation of the Federal Arbitration Act of 1925.
i. Agreements to arbitrate are valid, enforceable, and irrevocable.
ii. You can petition for specific performance of a promise to arbitrate.
iii. Court can appoint an arbitrator.
iv. You have to wait until arbitration is over to start a trial.
v. Arbitration enhances respect for the courts, reduces overcrowded dockets.
vi. Arbitration is especially useful for trade organizations.
c. Federal Arbitration Act of 1925: drafted by the ABA.
i. Arbitration agreements are valid, enforceable in contracts involving interstate commerce and maritime transactions.
d. Goals: to correct:
i. long delays in court proceedings resulting from crowded dockets, appeals, etc.
ii. the expenses of litigation
iii. the failure of litigation to make a decision that was considered fair by the people effected
e. Procedural or substantive? The issue was presented to the Congress in this way: “That the enforcement of arbitration contracts is within the law of procedure as distinguished from substantive law is well settled by the decisions of our courts.”
f. Both existing and future controversies: §2 of FAA: Validity, Irrevocability, and Enforcement of Agreements to Arbitrate:
i. A written provision in any maritime transaction or a contract evidencing a transaction involving commerce.
ii. To settle by arbitration a controversy thereafter arising out of such contract or transaction,
iii. Or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract or transaction,
iv. Shall be valid, irrevocable, and enforceable,
v. Save upon such grounds as exist at law or in equity for the revocation of any contract.
g. Iowa Code §679A.1
i. Existing controversy: valid, enforceable, and irrevocable.
ii. Future controversy: valid, enforceable, and irrevocable but shall not apply to:
1. A contract of adhesion.
a. credit card agreements, insurance, computer software
b. no bargaining power; take it or leave it
2. A contact between employers/employees.
a. not collective bargaining
iii. Unless otherwise provided in a separate writing executed by all parties to a contract, any claim sounding in tort whether or not involving a breach of contract.
11. Kulukundis Shipping v. Amtorg Trading Corporation  [CB39]:
a. It should be written into the contract what will happen if one party thinks the contract is void/unenforceable. Who will decide whether or not the contract is valid? What will happen to the arbitration clause if the contract is invalid?
i. At the time of this case, the view was that if the contract was void, so was the arbitration clause. Later, the doctrine of separability would shed some different light on this idea.
b. FAA §3: stay of the lawsuit. Ask the court to stay the lawsuit until the arbitration, as agreed upon, proceeds.
c. FAA §4: specific performance. Goes beyond the stay and affirmatively orders someone to do something outside the suit: proceed with arbitration.
d. Held: a ¶ who brought suit on a contract, without seeking to avail himself of its arbitration clause, has been held to have waived his rights thereunder, so that he could not subsequently, after a long delay, ask the court, under §3, to stay the action pending arbitration.
12. Court will look at two things when looking at the arbitration:
a. Determine whether there was an agreement to arbitrate.
b. Determine the scope of the agreement. Is the dispute within the scope? (§19)
13. Arbitration is a condition precedent to a suit for damages.
a. The duty of the claimant seeking damages is to proceed with arbitration first. Make sure you make the demand to arbitrate before you get into court.
14. Problems with Arbitration Agreements:
a. Changing the statute of limitations by a written agreement: valid if reasonable.
c. Not allowing consequential damages
d. Taking away any right to appeal
e. Need to get an arbitrator to decide whether the arbitration agreement is valid before the arbitration can go forward. Seems to be a conflict of interest with the arbitrator deciding whether or not they have a job.
f. Paying for the arbitrator and your attorney
Frequent Uses of Arbitration
Commercial Arbitration: se
b. Court’s function in a labor/arbitration case is limited to whether the party is making a claim which, on its face, is covered by the contract. Right/wrong is a question for the arbitrator.
c. Three major claims by the court:
i. All claims arising under an agreement must be arbitrated, not just those which a court would find had sufficient merit to be heard.
1. Rationale: both parties bargained for all cases to be heard. Also, a court doesn’t understand the claims well enough to be able to make a merit judgment.
ii. Arbitration of claims often has therapeutic value. The parties get to be heard and are often satisfied even if they don’t win. They also get to set aside this issue and get back to work sooner. You can also force the management to defend their actions. Also, the union gets to take charge and the employee is taken more seriously.
d. One of the big benefits to arbitrating labor claims is that, over time, vague or ambiguous terms of the CBA become clearer as disputes are decided.
25. Compromise decisions: the incentive to keep their name positive encourages arbitrators to make compromise decisions “splitting the difference” so they don’t appear unduly favorable to either side.
26. Rigged awards: when the parties agree on a settlement and convey that to the arbitrator, who incorporates it in the final award as “his” decision without openly revealing that it is the result of the parties’ compromise.
27. Medical malpractice: proposed legislative reform:
a. Preliminary hurdles requiring that claims first be submitted to a medical review or professional liability review panel.
i. If either party is dissatisfied with the award, they can demand a trial de novo.
b. Voluntary agreements to arbitrate between a patient a doctor (before or after a dispute)
c. Two major benefits of medical malpractice arbitration:
i. To reduce attorney interest in claims labeled frivolous or unmeritorious
ii. To reduce the size of damage awards in meritorious claims
a. Lemon law arbitration is mandatory at the consumer’s option under AAA.
b. Many states have made binding arbitration of fee disputes mandatory for the attorney at the request of the client.
c. Attorneys are experimenting with pre-dispute agreements in their retainer agreements. To use, they must give all the pros and cons of arbitration and give them the opportunity to seek the advice of independent counsel.
29. Elements Recommended for an Arbitration Agreement:
a. scope of the agreement
b. who will administer the agreement
c. what rules apply
d. who selects the arbitrator
e. what are the discovery procedures
f. who pays the costs and the arbitration fees
g. location of the arbitration
h. governing law
i. alter the statute of limitations
i. not necessarily fatal, but looked at closely
j. limitation of damages
i. may be unconscionable
k. statement that a court of competent jurisdiction can enter judgment on the award