Arbitrability of a Dispute – Does a Judge or Arbitrator Decide?
If you are involved in a dispute, the initial sentiment is to file a lawsuit and let a judge or jury decide the merits if it is not resolved in the interim. Another way to resolve a dispute is through binding arbitration. Frankly, with the uncertainty surrounding the judicial system right now, arbitration is not a bad way to go and likely the more efficient way to go, irrespective of the added administrative costs.
The key with arbitration is that it is a creature of contract. This means there needs to be an arbitration provision in an agreement for the parties to be bound to arbitration. Many contracts include an arbitration provision. Sometimes, however, a dispute revolves around the “arbitrability” of a claim or issue. One party believes the claim or issue falls outside the scope of an arbitration provision and the other party believes it is subject to the arbitration provision. In dealing with this, it is important for the arbitration provision to identify whether a judge or arbitrator decides the arbitrability of a dispute.
In a recent case dealing with an arbitration provision in a clickwrap agreement with Airbnb discussed here, the arbitration provision required the arbitration to be administered by the American Arbitration Association. The American Arbitration Association has a rule that states the arbitrability of a dispute is to be decided by the arbitrator. However, the appellate court did not like the the fact that the arbitration provision in the clickwrap agreement did not specifically reference that the arbitrator is to decide the arbitrability of the dispute and did not attach the American Arbitration Association’s rules. It found the arbitration provision was too general and ambiguous as it pertains to whether a judge or arbitrator decides the arbitrabitliy of the dispute, therefore, a judge is to decide.
To avoid this very issue, parties should simply specify whether a judge or arbitrator is to decide the arbitrability of a dispute in the agreement. If you want disputes to be resolved by arbitration, it only makes sense for the arbitrator to decide, which is why you are including the arbitration provision in your contract to begin with
Please contact David Adelstein at [email protected] or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.