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University of Nebraska School of Law
Gradwohl, John M.

Professor Gradwohl
Spring 2011
I.          General Introduction
A.        Arbitration – three element definition
                        a..        Agreement
                        b.         Determination with respect to a dispute by a third party
                        c..        Binding Resolution
                                    1.         Arbitration is alternative to courts and it is contractual.
                                    2.         Stems from an agreement that the parties will solve the dispute
outside the court system by voluntary means. 
                                    3.         Insurance agreements are not arbitral in NE.
                                    4.         Advantage of arbitration is cost. 
                                                i.          someone has to pay the arbitrator. 
                        d.         Whether there is an agreement comes from state law.
                                    1.         Which state law applies can be said in the agreement. 
                                    2.         Federal law deals with the arbitability of the agreement.
                                    3..        Can choose any state law that has a relationship to the deal that
you’re entering into. 
e.         Federal Arbitration Act – covers negotiated agreements and unilaterally
imposed agreements. 
f.          Definitions (no def in the Federal Arbitration act- only def. is in Black’s Law
Dictionary-there are two different definitions in the two most recent
dictionaries)-Cavia v. Katch (?)
                        1.         arbitration-
                                    i.          something that is binding
                                    ii..        an agreement with respect to a dispute that arises in the
g.         Excerpts from American Institute of Architects- p.178
                        1.         The architect can be an arbitrator. 
2.         The arbitrator doesn’t have to be a neutral third party- this is true
                                    in any context.
                        3.         The state law that applies is the law in which the project is located
                        h.         Kelly v. Benchmark Homes –Stated that we have to arbitrate before we
                                    litigate.  This was a policy reason made by Congress.
                        i.          Federal Arbitration Act –states that if the contract says you must arbitrate
                        first, they must adhere to that, but the parties are free to decide how they do that. 
                        j.          Arbitrators can’t compel a third-party to do anything
                                    1.         There is no discovery in Arbitration
                                    2.         Can’t compel testimony from a third-party
                                                i.          Advantages of Arbitration
                                                            a.         Someone knows about what is going on
                                                            b.         Litigation is extremely time consuming and usually
                                                                        takes several years
                                                            c.         Public aspect- there is a non-public aspect of arbitration
                                                                        1.         The arbitrator must abide by the agreement of
                                                                                    the parties- the arbitrator is the guest
                                    3.         Cite judicial economy and the inherit authority of the court to decide
                                                whether to arbitrate or litigate.  (it makes sense to arbitrate first and
                                                litigate second)
II.        Chapter 1-ACT
            A.        FEDERAL ARBITRATION ACT –Exists by legislation
                        a.         Statutory System- rather than judicial system
                                    i.          Starting Point- Chapter 1 General Provisions
                                                1.         First – defines what can be arbitrated
                                                            a.         §2 Contract-(a writing- the arbitration provision itself
                                                                         must be in writing)
                                                                        i.          Standardized agreements- UCC
                                                                                    1.         Binding only when adopted by a state
                                                                                    2.         Based on negotiated agreements
                                                2..        Two points at which the court has a major disagreement
                                                            a.         Agreement that determines whether you are going
                                                                        litigate or arbitrate
                                                                        i.          Motion practice- an application rather
                                                                                    than a petition
                                                                        ii.         Courts make the decision whether to litigate or
                                                                                    1.         Only to the arbitration agreement, not to
                                                                                                the whole document
                                                                                    2.         If it is clear that you should arbitrate
                                                                                                than an arbitration panel can make the
                                                                                    3.         §16(B) of Federal Arbitration Act
                                                                                    4.         UK §7 Vol. p.266
                                                            b.         Whether to enforce the decision
                                                                        i.          Arbitration decision is worth nothing
                                                                                    unless the court confirms
                                                                                    1.         Court can either confirm or vacate
                                                                                                a.         If the court confirms then it is
                                                                                                            i.          it is then considered an
                                                3.         What disputes are subject to an arbitration agreement?
                                                            a.         Kelley v. Benchmark homes- Express Warranty
                                                            b.         Labor Contracts- only certain aspects are arbitral
                                                            c.         Vol 1 p.12 –waives right to special damages
                                                                        i.          Sometimes statutes won’t let rights be waived
                                                                                    and therefore that part is severed. 
                                                            d.         Professor thinks that arbitration is a good system-
                                                                        however the system has problems.   
                                                                        i.          Can produce a result that is an aberration.
                                                                                    1.         Usually the problem is the decision
                                                                                    2.         There is no requirement of finding of
                                                                                                fact or conclusions of law.  There is no
                                                                                                recording of the proceeding. 
                                    a.         Administrative Rules
                                                1.         Difference between the way law is and the way it works. 
                                                2.         Look at Case Law
                                                            i.          Wilko 1953- Supreme Court said that arbitration is a
                                                            ii.         Rodriguez 1989- overruled Wilko
                                                            iii.        Alexander 1974- Labor case
                                                            iv.        Scherk 1974- International Case- Supreme Court said
                                                                        that procedures in regards to a Civil Rights case in an
                                                                        individual claim is not right.  Supreme Court decided to
                                                                        enforce arbitration.  
                                                            v.         Gilmore v. Interstate Employment
                                                                        a.         Footnote 3 p.236 –a  worker may not waive a
                                                                                    right unless it is knowing and voluntary.
                                                                        b.         Determined the artribality of certain statutory
                                                                                    1.         Involved a statute that involved certain
                                                                                                public policy. 
                                                                        c.         P. 234-235 black letter rule
                                                                        d.         It’s okay to substitute an arbitration process for a
                                                                                    judicial system. 
                                                                                    1.         there must be something specific of
                                                                                                evident partiality
                                                                                    2.         Discovery?
                                                                                    3.         There is no automatic requirement for a
                                                                                                written opinion
                                                3.         AAA Rule 42 and NAA Rule 37 H entitled to a reasoned opinion
                                                            i.          UK Rule 53=2
                                                4.         Award doesn’t have a lot judicial power until it becomes a
                                                            decree of the U.S. – (Lindland v. U.S p.531.)
                                                            i.          Once you have a judicial decision then preclusion
                                                                        applies (Lindland p. 533)
            b.                     §10 Federal Arbitration Act
                                    1.         Within year
                                    2.         Bring it in a court that is specified in the contract
                                    3.         Enforceable in state courts
                                                i.          There is no U.S. Supreme court case under §10
                                                ii.         What about common law grounds.
                                                            a.         Manifest disregard of the law- (common law grounds)
                                                                        1.         This equals thumbing your nose at the law
                                                            b.         Easter Associated Coal p.162
                                                                        1.         Labor management case
                                                iii.        Third area- International Arbitration review p.260 Vol. 2 spells
                                                            out public policy
                                                            a.         Should parties be able to contract fro an expanded
                                                                        judicial review?
            A.        PREFATORY NOTE
                        a.         There are a number of principles that the Drafting Committee agreed upon at the
                                    outset of its consideration of a revision to the UAA.
                                    1.         First, arbitration is a consensual process in which autonomy of the
                                                parties who enter into arbitration agreements should be given primary
                                                consideration, so long as their agreements conform to notions of
                                                fundamental fairness. 
                                    2.         Second, the underlying reason many parties choose arbitration is the
                                                relative speed, lower cost, and greater efficiency of the process.  The law
                                                should take these factors, where applicable, into account. 
                                    3.         Finally, in most cases parties intend the decisions of arbitrators to be
                                                final with minimal court involvement unless there is clear unfairness or a
                                                denial of justice. 
                                                i.          §14 insulate arbitrators from unwarranted litigation to insure
                                                            their independence by providing them with immunity. 
                                                ii.         §12 requires arbitrators to make important disclosures to the
                                                iii.        §8 allows courts to grant provisional remedies in

In response, the NE Constitution was amended in 1996 to state
                                                            that the Legislature may provide for the enforcement of
                                                            mediation, binding arbitration agreements, and other forms of
                                                            dispute resolution.  See Cornhusker Int’l Trucks
                        b.         Cornhusker Int’l Trucks, Inc., v. Thomas Built Buses, Inc.
                                    1.         Bus manufacturer filed motion for order confirming arbitrator's award,
                                                finding it had good cause to terminate its distributor sales agreement with
                                                distributor, and distributor moved to vacate award. The District Court,
                                                Lancaster County, Earl J. Witthoff, J., confirmed arbitrator's award, and
                                                distributor appealed. The Supreme Court, Wright, J., held that: (1)
                                                arbitration clause in agreement encompassed dispute over legality of
                                                termination of agreement under state motor vehicle industry licensing
                                                statutes; (2) plain language of agreement required arbitration of
                                                unresolved dispute regarding termination of franchise; and (3) Federal
                                                Arbitration Act (FAA) applied to agreement and preempted conflicting
                                                state laws.  Affirmed.
                                                i.          The FAA requires that any doubts regarding the scope of an
                                                            arbitration clause be resolved in favor of arbitration. 
                                                ii.         Nebraska Uniform Arbitration Act- requires voluntary entry
                                                            into arbitration.  Federal law doesn’t require this. 
                        c.         Neb. Const. Art. I §13 –Justice administered without delay; Legislature;
                                    authorization to enforce mediation and arbitration. 
                                    1.         “…except that the Legislature may provide for the enforcement of
                                                mediation, biding arbitration agreements, and other forms of dispute
                                                resolution which are entered into voluntarily and which are not revocable
                                                other than upon such grounds as exist at law or in equity for the
                                                revocation of any contract.”
                        d.         Selected Portions of UK Arbitration Act 1996
            A.        Federal Substantive Arbitration Law
                        a.         Prima Paint Corporation v. Flood & Conklin MFG. CO. (1967) (gatekeeper)
                                    1.         This case presents the question whether the federal court or an arbitrator
                                                is to resolve a claim of ‘fraud in the inducement,’ under a contract
                                                governed by the U.S. Arbitration Act of 1925, where there is no evidence
                                                that the contracting parties intended to withhold that issue from
                                                i.          This is a business to business transaction
                                                ii.         there is no difference between b2b and consumer
                                    2.         Issue: whether a claim of fraud in the inducement of the entire contract
                                                is to be resolved by the federal court or whether the matter is to be
                                                referred to the arbitrators.  (should court compel arbitration and stay
                                                judicial proceedings)
                                                i.          Under §4 of the Act, with respect to a matter within the
                                                            jurisdiction of the federal courts save for the existence of an
                                                            arbitration clause the federal court is instructed to order
                                                            arbitration to proceed once it is satisfied that the making of the
                                                            agreement for arbitration or the failure to comply (with the
                                                            arbitration agreement) is not an issue. 
                                                ii.         the statutory language does not permit the federal court to
                                                            consider claims of fraud in the inducement of the contract
                                                iii.        §3 FAA –the provision must be written someplace –Prima Paint
                                                            had such a written provision p. 31
                                                iv.        How did this get into federal court? 
                                                            a.         Diversity jurisdiction
                                                            b.         Do you look to state (N.Y law) or do you look at other
                                                                        state laws.
                                                            c.         choice of law issue –and preemption
                                                            d.         If you don’t have a rule that is fed. law that wipes out
                                                                        state law, then there is a mess…don’t know what law