The Patchwork of Domestic Rules on Award Form - Chapter 2 - The Reasoned Arbitration Award in the United States: Its Promise, Problems, Preparation and Preservation
John Burritt McArthur has been serving as an arbitrator since 1994. He has 23 years of experience as an arbitrator, 34 years as a trial lawyer in state and federal courts around the country, and is licensed to practice in Texas, California, and Alaska as well as in a variety of federal courts. He was a Partner at Susman Godfrey LLP, worked for Hosie McArthur LLP for several years, and today has a solo practice that combines arbitration practice with complex commercial trials. He has major litigation and arbitrator experience in five main areas: Energy, Oil and Gas, Electricity; Contract and Tort Business Disputes, including UCC Disputes; Antitrust; Investment Disputes, Fiduciary and Joint Venture Claims, Securities and Insurance. Mr. McArthur's broad work experience is equally suited to business and commercial arbitrations. He has represented plaintiffs and defendants in large, often highly technical commercial cases throughout his career. He has handled federal and state court cases, arbitrations, cases in MDL proceedings and class actions. His clients have ranged from some of the world's largest corporations, including Aetna and British Petroleum, to Alaska native corporations, States, individuals and small businesses. Mr. McArthur has been acknowledged for his litigation experience by his peers. He is currently chair of the LCA's International Institute on Natural Resources, Energy and Environmental Law. He has long held an "av" rating from Martindale-Hubbell. He is a member of the Million-Dollar and Multi-Million-Dollar Advocates Forum. He has published dozens of articles on legal issues, including on energy issues, arbitration, case management, various aspects of deregulation, and antitrust. He has also served as an expert in energy cases. A statement of his arbitration philosophy can be found at http://www.johnmcarthurlaw.com/arbitration.htmz.
Originally from The Reasoned Arbitration Award in the United States: Its Promise, Problems, Preparation and Preservation
Chapters One–Three: What reasoned awards should provide, today’s varying rule requirements, and the benefits of reasons. The first three chapters illustrate why reasons matter. [...]
Chapter Two treats readers to an overview of the mixed provisions on the presumptive form of award in domestic arbitration rules. CPR and JAMS treat reasoned awards as their default form, as does Fed-Arb. In contrast, the AAA’s broadest rules, its commercial rules, still use standard awards (those without reasons) as their default. FINRA also treats standard awards as its default, and even its optional “explained” award is not fully reasoned. The AAA’s approach is increasingly riddled with exceptions, however; a number of its specialized rules take reasoned awards as their default standard. And experienced AAA commercial arbitrators usually write reasoned awards, not standard awards, in cases of any significant size, that is, unless the parties tell the arbitrators not to include a rationale in the award.
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from Chapter Two. The Patchwork of Domestic Rules on Award Form
The tension between conflicting models of arbitration is reflected in our domestic arbitration rules. Domestic rules are not fully consistent on the default form of award. The American Arbitration Association’s general commercial rules treat standard awards as the default award form, as do the rules of the Financial Industry Regulatory Authority; but many AAA-specialized rules define reasoned awards as their default form. and CPR and JAMS treat a reasoned award as their default. Thus, some domestic rules embrace reasoned awards as the common, default practice while others cling to the older idea that arbitrators should issue silent standard awards unless asked to give reasons. This inconsistency is built into the fabric of domestic arbitration in the United States.
A. The Divide between the AAA and FINRA, and CPR and JAMS
The AAA, the nation’s longest-established general arbitration provider, continues to make standard awards its default form in general commercial cases and in construction cases with stakes of less than a million dollars. Its Guide to Commercial Mediation and Arbitration for Business People instructs that “[a]s a general rule, AAA commercial awards consist of a brief direction to the parties.” AAA commercial arbitrators are free, though, to author reasoned awards if they think the circumstances warrant. The parties in a AAA commercial arbitration can require a reasoned award, but only if they both agree to ask for it and even then they only have a right to that award form if they lodge their request before the arbitrators are appointed, i.e., before the arbitration really has gotten underway at all. Whether by party choice or arbitrator election, though, reasoned awards are common as a matter of practice in AAA commercial arbitrations. The AAA’s rules and Guide, however, have not caught up with the trend.
FINRA, the securities and exchange industry’s self-regulatory body, now allows “explained decision[s]” but only upon joint request, and what is explained is limited because it does not require (though it does not prohibit) an explanation of the arbitrators’ legal analysis or of their damage computations. FINRA’s explained decisions have proven very rare. Its omission of any requirement that arbitrators explain the law is an expression of the older law-free version of arbitration, as well as of resistance by major players in securities arbitration to public articulation of legal rationales. Thus, FINRA’s awards, even when explained, are only partially reasoned unless the arbitrators sua sponte give a full explanation.