AAA Arbitrations Now Include an Appeal Process for Complex Commercial Disputes

Years of experience litigating in the federal courts on the one hand, and arbitrating before the AAA on the other, have left me skeptical of the idea that arbitration is somehow preferable to the courts for resolving complex business disputes. My own experience is that, for those types of cases, arbitration is often not less expensive, seldom faster, and less likely to result in an accurate result (if you define accurate as a result roughly within the bell curve of possible results that an objective observer might forecast for a case). I discussed these issues in detail here, here and here in the past.

One of the bigger concerns I have discussed in the past is the risk of parties just assuming that arbitration is a better forum for a complex business dispute, rather than carefully considering in advance whether or not it is the better forum for their particular dispute and, even more importantly, for the factual and legal arguments they intend to advance. One of the important points I have discussed in the past is that a company and its counsel should carefully consider whether the strength of their position lies in legal arguments or instead in factual ones before electing arbitration, because it is a mistake to forego appellate review when your best arguments are legal. Arbitration panels themselves too frequently get the law wrong or reach incorrect results in cases where a complex or novel legal issue is outcome determinative, for a number of reasons, including an inherent tendency (for a number of reasons) to be more fact driven in their decision making than law driven. As those of you who practice in this area already know, appellate review of arbitration rulings by the courts is extremely limited and unlikely to overturn an award based simply on a glaring error in legal analysis by the arbitration panel, even though that is exactly the type of situation in which an appeals court would freely overrule a trial judge.

Now, the AAA is offering an appellate stage for complex commercial arbitrations, which will go far, at least on paper, towards addressing this problem. While it may not be preferable to going to court and having full appellate review by a federal circuit bench or state supreme court, it will at least allow the parties the opportunity to brief, address and possibly remedy legal errors by an arbitration panel. The devil, of course, will be in the details, but this is a promising step towards making the promise of arbitration – faster and less expensive but accurate dispute resolution – align with the reality.