Sometimes current events provide an
occasion perfect storm to educate about arbitration basics. This is one of those occasions.
Here are questions that
friends and colleagues storming mad people have asked me in the past day or so, with my best answers:
- Does an arbitration agreement have to be signed by both parties to be enforceable (i.e. ride out the storm)?
- The Federal Arbitration Act provides that an arbitration agreement must be “written,” but it does not also say it must be signed by all parties. Whether a signature is required, along with all answers about the enforceability of arbitration agreements, depends on state contract law. In general, a contract requires an offer, acceptance, and consideration. And in most states, “acceptance” of an offer can take many forms. (See, for example, this case (about Macy’s) finding a valid agreement without one party’s signature , but these cases finding no valid agreement where a signature was missing.)
- Do arbitrators have authority to issue temporary or ex parte injunctions?
- It depends. Arbitrators derive their authority from the parties’ arbitration agreement. If that arbitration agreement expressly grants the power to issue emergency, temporary, or ex parte injunctions, or if the arbitration agreement incorporates rules of an administrator (like the AAA) and those rules grant the power to issue those types of injunctions, then the arbitrator has power to enjoin the parties on an emergency or temporary basis (but only the parties, otherwise non-parties will kick up a storm and vacate the award).
- How are injunctions from arbitrators enforced?
- Within the arbitration proceeding, a party may seek sanctions from the arbitrator if the arbitrator’s temporary injunction is violated. Those sanctions can include anything authorized by the applicable rules. (Remember in this case, when the sanction was over $600 million? Oh, that created a sh*tstorm.) Outside the arbitration proceeding, the party wanting to enforce the injunction (whether temporary or permanent) must first obtain a final arbitration award, and then have that award confirmed in federal court. (Remember, only “final” awards can be confirmed under the Federal Arbitration Act.) After that final award is confirmed in court, it is a judgment that can be enforced like any other court judgment.
- However, when the winning party asks a court to confirm an award, the losing party often moves to vacate the arbitration award. And the absence of a valid arbitration agreement is a solid basis to vacate the award. For example, the Revised Uniform Arbitration Act authorizes vacatur if: “there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection.”
**Thanks for all the nudges about writing this post. You convinced me that my desire to offer context to the news should trump my desire to storm off and pretend it is not happening.