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What To Tell a Client About Arbitration

Arbitration is basically a private trial without any meaningful appeal or relief from wrong decisions.

The advantages are:

The disadvantages are:

Appeal from an Arbitrator's Decision (Case Review) (From Williamette's wonderful newsletter -- subscribe at: http://www.willamette.edu/law/wlo/dis-res/ -- an essential site to keep current with the law that governs ADR).

Arbitration: Manifest Disregard Of Law By Arbitrators Is Not Ground For Reversal Siegel v. The Prudential Insurance Co (Calif Ct App 11/20/98)

Siegel took his wrongful discharge claim to arbitration under the rules of the National Association of Securities Dealers. The arbitration panel awarded $113,016 in actual damages, $225,000 in general damages, and $1,000,000 in punitive damages. The employer sued to vacate the arbitration award on the grounds that the arbitration panel (1) exceeded its authority because not all the arbitrators heard all the evidence; (2) allowed into evidence a secretly recorded conversation, in violation of public policy and in disregard of law; (3) acted in manifest disregard of law by awarding emotional distress damages without evidence of severe mental injury; and (4) acted in manifest disregard of law by awarding $1 million in punitive damages without any evidence to support the award.

The trial court confirmed the award and denied the employer's petition to vacate the award; the California Court of Appeal affirmed. The court held that the case should be decided under the law of California, and the California Arbitration Act does not allow judicial review of an arbitration award, even when it is argued that the arbitrators acted "in manifest disregard of the law." Although the arbitration agreement is covered by the Federal Arbitration Act (FAA), and many courts have taken the position that they can review an arbitration award for "manifest disregard of the law," none of this preempts the California rule which prevents re-weighing the merits of an arbitrator's decision.

[Faculty Editor's Comment: Most courts deciding the issue have decided that an arbitration award which is governed by the FAA can be vacated if the arbitrator acted "in manifest disregard of the law." These results themselves are curious in light of the fact that the FAA does not state this as a ground for vacating an award. This judicially-created standard might be precarious because of its lack of statutory foundation. Even if the standard is rooted in the FAA, it would be rooted in Sections 10 and 12 which are written for federal courts, and say nothing about state courts.]

[Full Decision Online: http://www.courtinfo.ca.gov/opinions/documents/B115350.DOC]

ADR Online: Choice Of Arbitration Forum Unenforceable 'Unreasonable, Excessive' Cost A Deterrent, an Analysis of Brower v. Gateway 2000 Inc .By Cerisse Anderson

An arbitration clause in a contract shipped with a mail-order computer is valid, but the requirement that buyers arbitrate disputes with the seller under the rules of the International Chamber of Commerce is unenforceable because such proceedings are too expensive for most consumers.

Details: http://www.ljx.com/practice/arbitration/0814arbforum.html

Arbitration: Arbitrator Denied Party Review of Duplicate Evidence After Evidence Was Misplaced Circle Industries v. Parke Construction Group, Inc. (E.D.N.Y. 10/8/98) ... violated rules 29, 31 and 32 of the Federal Arbitration Act by not allowing Circle to review the duplicate evidence from Parke, and refusing to hear material evidence. The court stated that Circle had failed to meet their burden of proof by showing that they were "denied a fundamentally fair hearing and consequentially suffered prejudice."


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