Commercial Arbitration Outline
· Three main questions from class
o How to get into arbitration
o The process
o How to get a review of the result
· What is Arbitration:
o FAA and state arbitration statutes don’t define arbitration
o Parties must:
§ Chose a judge
§ Who renders a binding decision
§ On the merits
§ Based on the proof presented by the parties
§ This is Rush v Moran
· AMF v Brunswick
o NAD was in practice a final decision maker
o Counts as arbitration
§ Cheng- Canindin v Renaissance hotels
· Defines arbitration as
o Third party decision maker
o Mechanism for ensuring neutrality
o Decision maker chosen by the parties
o Opportunity for both parties to be heard
o Binding decision
· This is a way to enforce fairness, so something can be so one sided that it isn’t actually arbitration
· ENFORCING DOMESTIC ARBITRATION AGREEMENTS
o Who decides what is arbitrable?
§ There are three contexts that matter here
· The party not wanting to arbitrate is the plaintiff:
o They simply file a lawsuit
§ The other party can ask for a stay under FAA section three OR ask for an order to compel arbitration under FAA section 4
· The defendant doesn’t want to arbitrate
o The other party try and set up arb, the D can then try for an injunction against arb
· An Independent lawsuit to compel arb under section 4
o FAA (and state statutes that adopt the UAA) make arb valid, irrevocable and enforceable FAA sec 2
o Arb agreement must be in writing (section 2 again)
o Enforcement of arb can be challenged at “such grounds at law or in equity for the revocation of any contract”
§ See below for more on this
o Prima Paint
§ Answers question of whether the court or the arbitrator decides question of fraud in the inducement of a contract
§ Supreme court says this question is for THE ARBITRATOR
· If the issue is fraud in the inducement of the arb clause itself, then the issue is for the court because it goes to the making of the agreement to arbitrate
§ But the arbitrator decides issues with contract generally
· This is true for both section 4 actions to compel and section three actions to stay
§ This is the seperability doctrine
· Arb clause is untainted by issues of fraudulent inducement of the contract itself
o First Options rule
§ Essentially answers question about who decides who gets to decide
· Kaplans didn’t think they were personally liable for their companies debt
· Didn’t think they had agreed to arbitrate the merits of the dispute
· And finally, disagreed about who should have the power to decide arbitrabilty
o Says court must defer to an arbitrators arbitrability decision when parties have contracted that the arbitrator can decide that
§ Courts don’t assume that parties agreed to arbitrate arbitrability unless there is “clear and unmistakable evidence” that they did so
o So, the court gets to decide whether or not you agreed to arbitrate certain things (unless you provide otherwise)
· Courts also decide challenges to the entire contract when the challenge implies that no contract exists (I agreed to nothing) because that is by definition a challenge to the arb clause
o So like saying I didn’t sign that, you forged my signature etc (this is footnote 1 in buckeye)
o However, fraud in the inducement or other things that would normally make the whole contract void ab initio STILL GO TO THE ARBITRATOR absent clear and convincing evidence
§ So questions of scope are for the court (questions of procedure are usually for the arbitrator as stated in the Howsam case
o Buckeye v Cardegna
§ State law distinctions between void and voidable don’t matter, go to the arbitra
the arbitrator
o Questions of scope go to judge
§ In cases where party concedes that there is a valid agreement but that a certain issue isn’t covered by it
§ Simula v Autoliv
· Issue is- does a parties agreement have them agreeing to arbitrate scope?
§ Language in question is that they agreed to arbitrate all claims : “arising in connection with this Agreement”
§ Determinations of arbitrability are de novo review
· Does this language include questions of scope?
· Not clear and unmistakeable
· So, turtle issue here- the question of whether scope is within the scope of the arbitration still goes to the court
· Contract Defenses to Arbitration
o Allowable because of the FAA language “save upon such grounds as exist at law or equity for the revocation of any contract”
§ Supreme court says this means arbitration agreements are subject to general contract law principles- Allied Bruce Terminix Cos. V Dobson
o Badie v Bank of America
§ Unilateral ability to modify agreement after customer enters them
· Try to add an ADR clause
· K formation and assent issue
o Court says the unilateral clause only applies to the parts of the contract which are intrinsic to the agreement
o No ADR clause in original K
o Badie thinks you need notice of which terms are subject to change- so it must be an integral term
§ Court uses standard rules of K interpretation
o Consideration
§ Gibson
· Employee signs promise to arbitrate, Employer isn’t required to.
