Generally, once a decision is rendered in an arbitration, payment of any damages awarded is due. If a party fails to pay as required by a decision, the other party can enforce the award in a summary proceeding. Here’s what a party seeking enforcement should know:
- S. courts have the power to enforce arbitration awards. Courts have had the right to enforce arbitration awards since the Federal Arbitration Act(“FAA”)[1]was enacted in 1925. The FAA made arbitration agreements involving interstate commerce specifically enforceable,[2]and established very limited judicial review of arbitration awards.[3]The legal bases of the FAA are the U.S. Constitution’s Supremacy Clause and Commerce Clause.
With respect to state claims, almost every state has enacted state arbitration laws covering intra-state commerce.
- Decisions can only be challenged on one of four major grounds.Section 10 of the FAA sets forth four major grounds for challenging arbitration awards: fraud, arbitrator bias, arbitrator misconduct, or the arbitrators exceeding their authority. The United States Supreme Court in Hall Street Associates v. Mattel 552 U.S. 576 (2008), stated that the sole grounds for moving to vacate arbitration decisions were those in the FAA. Accordingly, absent one of these four grounds, decisions can rapidly be converted to enforceable judgments.
Note that unlike many other ADR providers, ARS offers an appeal process when one or more of the parties believes a decision is legally incorrect. Any party may file an appeal of the decision based on one of two reasons: (1) The Arbitrator used the wrong law or legal standard or (2) The Arbitrator used the correct legal standard but applied it incorrectly as to the facts of the case as determined by the Arbitrator. The non-appealing party has the right to respond. On appeal, the matter is referred to an Appellate Panel of online arbitrators who review the matter and render a decision either affirming the original decision or rendering a new one. The entire process is handled online quickly and efficiently.
- Awards can be converted into judgments through a simple process. If a party fails to pay as required by a decision, the party who was not paid can file a motion to confirm the arbitration award. This is a “summary proceeding” and does not require the party to start a lawsuit.
Where the parties use an online ADR provider with no physical venue, the motion to confirm the award should be filed in a court where the party is seeking to execute the judgment. In other words, the party should pick a jurisdiction where the defendant is located and has property that could be attached to satisfy the judgment.
The finality and speed of arbitration are among the main reasons that parties choose arbitration to resolve their disputes. Courts will enforce an arbitration decision in an expedited manner and allow only very limited grounds for review. If you are considering ADR for your dispute, read more about ARS’ complete end-to-end online ADR process. Visit ARS’ FAQ page or contact us for a consultation.
[1]See 9 U.S.C. §§ 1 et seq., available at http://codes.lp.findlaw.com/uscode/9/1.
[2]See 9 U.S.C. §§ 1 and 2.
[3]See 9 U.S.C. § 10.
