The American Arbitration Association (“AAA”) has now adopted Optional Appellate Arbitration Rules. The Appellate Rules, which became effective November 1, 2013, provide an optional appellate process for arbitrations before the AAA or the International Centre for Dispute Resolution (“ICDR”). The Appellate Rules provide for an appeal to an appellate arbitral panel that would apply a standard of review greater than that allowed under federal and state statutes -- permitting review of errors of law that are material and prejudicial, and determinations of fact that are clearly erroneous. The Appellate Rules contemplate completion of the appellate process in about three months' time.

Agreement Required. The right to appeal in an arbitration proceeding is a matter of contract, and use of the AAA’s appellate process requires agreement of the parties. The agreement can be part of an underlying arbitration agreement or a post dispute agreement entered into between the parties.

Appellate Deadline and Effect on Finality of Award. An appeal from an underlying award must be filed with the AAA within 30 days from the date that the underlying award is submitted to the parties. An appellee may file a cross-appeal within seven days after notice of filing of an appeal. If an appeal is filed, the underlying award is not considered final for purposes of any court actions to modify, enforce, correct or vacate the underlying award, and the time for commencement of judicial enforcement proceedings is therefore tolled during the pendency of the appeal.

Appeal Tribunal. The appeal tribunal will be selected from the AAA or IDCR appellate panel, unless the parties have provided for their own method of appointment. The appeal tribunal will review appellate briefs and the record provided by the parties, such as relevant portions of the transcript of the arbitration hearing, expert reports, deposition transcripts, affidavits and documents that were admitted into evidence during the arbitration hearing, and briefing submitted in the underlying arbitration. The appeal tribunal can decide the appeal on the parties’ written submissions. If the appeal tribunal deems oral argument necessary, or either party requests oral argument, it is within the appeal tribunal’s discretion to order oral argument, which shall occur within 30 days of submitting the final appellate brief.

Timing and Scope of Appellate Relief. The appeal tribunal must issue its decision within thirty days of service of the final appellate brief (or thirty days after oral argument). The appeal tribunal can (1) adopt the underlying award as its own; (2) substitute its own award for the underlying award; or (3) request additional information from the parties, and notify the parties of the appeal tribunal’s exercise of its option to extend the time to render a decision (not to exceed 30 days). There are two things that the appeal tribunal may not do: order a new arbitration hearing or send the case back to the original arbitrators for further action. The appeal tribunal must issue a written decision that provides a concise summary and explanation of its decision. Once it is provided to the parties, the decision of the appeal tribunal becomes the final award for purposes of judicial enforcement proceedings.

Practice Pointers.

  • If a dispute arises and the applicable arbitration provisions do not include a right of appeal, consider whether to add appellate review to the arbitration process. If so, discuss this with opposing counsel, because the appellate process will require an agreement.
  • In drafting arbitration provisions in commercial agreements, consider whether to include a right of appeal as part of the arbitration process. Parties may want to include appeals for all disputes or for certain kinds of disputes (e.g., disputes over specified kinds of claims or disputes in which the amount in dispute or the amount awarded exceeds a designated threshold amount), or in other circumstances. Or parties may prefer to avoid an appellate process entirely in favor of quicker resolution, lower cost, and the finality that single-level arbitration can provide.