Originally from:

AAA Handbook on Arbitration Practice - Second Edition

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CHAPTER 34

THE DEVELOPMENT OF REMEDIAL POWER:
ARBITRATORS’ ABILITY TO AWARD
MONETARY SANCTIONS

Philip D. O’Neill, Jr.

I. Introduction

Historically, American courts concluded that arbitrators do not
inherently possess the full panoply of judicial powers to sanction
abusive or otherwise noncomplying conduct during an arbitration,1 with
only rare exceptions.2 Unless authorized by the parties in their
agreement, in the applicable institutional arbitration rules incorporated
by that agreement, or in the governing arbitration law, an arbitrator’s
remedial powers are limited. Typically, those limits are not a serious
impediment to serving justice. But they can be in hard cases in which a
key element of proof of a cause of action or the amount of damages
resides, in whole or large part, in the control of a recalcitrant adversary
who refuses to produce it. The harm from a party’s misconduct can be
substantial. For example, trade secret misappropriation claims often
take their direction from the documentary trail. If the trail is false or
materially incomplete due to non-production of critical documents, the
work undertaken by the claimant’s attorney and expert will be
misdirected. The cost of this deflection can be staggering. With the
stakes this high, it is reasonable to expect an arbitrator to be able to
impose remedial sanctions that have meaningful in terrorem and/or
economic effect.3 However, that was not necessarily the case in most
jurisdictions in the past, and there is only now an emerging trend
finding such power in the interpretation of some arbitral institutional
rules, and in applicable law, at least in those states that have adopted
the Revised Uniform Arbitration Act of 2000. (“RUAA”)(See
discussion infra, on statutory empowerment).

Historically ADR providers typically trained their arbitrators to draw
an “adverse inference”4 from a party’s refusal to produce documents in
discovery. Suppose a party fails to produce documents leaving discrete