Arbitration Appeals: A Safety Valve That Is Fast, Fair, Cost-Effective And Final

• Published date: 14 September 2021
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: JAMS
• Author: Patricia H. Thompson

Arbitration provides a toolbox of dispute resolution options that are quicker, more targeted and less expensive than litigation. However, formal and informal surveys reveal that one important component of this toolbox is unknown or misunderstood by corporate and outside counsel: the parties' contractual right to appeal the final award, "on the merits," to a panel of seasoned and knowledgeable appellate arbitrators.¹ In fact, the cumulative experience of JAMS' appellate neutrals proves that appellate arbitration is a fast, fair, final and cost-effective dispute resolution option that provides parties with the reassurance that they can have "another set of eyes and ears"² review their arbitration awards.³

Contracting for the Private Right of Appeal

A widespread but mistaken belief that there is no appellate remedy for erroneous arbitration awards is often cited as one of the chief negatives of arbitration.⁴ This misunderstanding likely stems from the fact that the Federal Arbitration Act (FAA) and many state arbitration statutes provide few grounds for judicial relief from a final arbitration award.⁵ Indeed, the FAA does not allow for any judicial appellate review of an award, even by agreement of the parties.⁶

Nevertheless, neither the FAA nor state arbitration codes prohibit parties from contracting for the right to appellate review of an arbitration award via a private panel of appellate arbitrators. Parties may agree to this option in their original arbitration agreement or by written stipulation at any time after a dispute arises.⁷ JAMS suggests the following model contract provision: "The Parties adopt and agree to implement the JAMS Optional Arbitration Appeal Procedure" with respect to any arbitration award "arising out of or related to this [arbitration] agreement."⁸ JAMS' arbitration rules also allow parties to "agree at any time" during an arbitration to adopt the JAMS optional appellate procedures as an optional remedy in that proceeding.⁹ Including such an option in an arbitration does not mean that it will be used, but given humankind's undeniable proclivity to err, parties approaching an arbitration hearing may be comforted by the existence of a contractual backstop to guard against the risk of arbitrator mistakes.¹⁰

A Fast and Final Appellate Process

Some speculate that allowing appellate scrutiny of arbitration awards would "frustrate the purpose of having an arbitration at all ' the quick resolution of disputes and the avoidance of the expense and delay associated with litigation."¹¹ The experience of JAMS' appellate arbitrators proves otherwise: Parties may enjoy the peace of mind provided by appellate review, as well as receive a quick and final arbitral award, free of the delays caused by the lengthy appeals and retrials that plague litigation.¹² In a...