What Is an Arbitration Award?

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 What Is Arbitration?

The term arbitration refers to a legal process in which parties attempt to resolve any and all legal conflicts or disputes they may have. Arbitration is an alternative dispute resolution used to avoid going to court, or proceeding with traditional litigation. In other words, instead of preparing and presenting their case to a judge or jury, disputing parties will attempt to resolve their disputes through arbitration.

In general, disputing parties may voluntarily submit to arbitration, however, in other cases, arbitration is mandatory. Additionally, there are certain agreements, such as employment agreements, which contain clauses requiring that all disputes are to be resolved through the arbitration process.

The terms of mandatory arbitration are generally detailed through a provision within the agreement. This provision is called a mandatory arbitration clause. That arbitration clause then requires that a party seeking to resolve a dispute must first try to resolve their dispute through arbitration.

In general, the arbitration process is conducted by an individual who is known as an arbitrator. The arbitrator is a neutral third party who is responsible for listening to each party’s claim and listening to all of the evidence each party provides to prove their claim. Arbitrators then use that information to make a decision regarding the claims presented to them. The arbitrator’s decision takes the form of an arbitration award, which will be discussed further below.

It is important to note that there are certain disputes that cannot be arbitrated, due to the fact that state or federal law actually requires litigation of some matters. For example, disputes over whether or not a crime was committed must be addressed through the criminal court system.

However, most civil disputes between private parties can be arbitrated. Common examples of disputes that can be arbitrated include contract disputes, commercial disputes, consumer disputes, labor disputes, or even certain family disputes regarding property division or custody disputes.

Why Does Arbitration Occur?

Once again, arbitration is commonly court-ordered. This is because contracts often contain an arbitration clause that mandates arbitration for disputes. Within an agreement that contains an arbitration clause, all parties to the agreement will agree to attempt to first resolve any and all disputes through arbitration rather than private litigation. This means that the parties forfeit their right to initiate civil lawsuits over disputes

Importantly, arbitration clauses are recognized and allowed by law. However, there are many different jurisdictions that impose limitations on what rights may be waived under an arbitration agreement. For example, in general legal disputes involving malpractice cannot be waived in an arbitration agreement in many jurisdictions.

Another reason for arbitration is that it is almost always considerably less expensive than traditional litigation. Additionally, the arbitration process is also always a faster way of having legal issues resolved, as the traditional court process has numerous different steps that are required to be followed before a legal dispute may even be presented to a judge or jury.

In other words, parties that choose arbitration save time and money by not having to follow the state laws on civil procedure.

What Is an Arbitration Award?

When an arbitrator makes a decision that resolves the dispute, they will generally issue an arbitration award. An arbitration award is commonly money paid to one party by the other.

However, an arbitration award may also be non-financial, such as ceasing a problematic business practice, or adding an employment incentive. In an arbitration award, the arbitrator details what each party is entitled to.

Arbitrators generally find in favor of just one party involved, with the award only relieving that one party. However, there are some instances in which an arbitrator will determine that each party involved has made legitimate claims. In such cases, an arbitration may then render an award that grants each party some sort of relief.

Is a Jury Award the Same as an Arbitration Award?

In short, no, a jury award is not the same as an arbitration award. Once again, the purpose of arbitration is to avoid the traditional legal process. As such, once both parties submit to have their legal dispute resolved by arbitration, then the arbitrator will be the fact finder that decides on whether or not their claim succeeds and issues an arbitration award.

In contrast, in a traditional legal process, the two parties will present their respective cases before a judge or jury, who will then decide on the merits of their case. If a party is successful in proving each and every element of their civil case, then the fact finders will also consider their damages claim.

A damages claim will typically outline all of the monetary relief that a plaintiff (i.e. the party that was injured) is requesting. The jury award will then be given as a result of the case being presented in civil court, and is generally monetary in nature.

On the other hand, an arbitration award is given by an arbitrator after the conclusion of an arbitration hearing. Additionally, unlike jury decisions, an arbitration award cannot be appealed to an appellate court. Further, arbitration awards result from a private proceeding, whereas a jury award comes from a civil court trial.

Can I Appeal This Award?

Once again, whether you can appeal an arbitration award will depend on whether the arbitration was binding. If the arbitration was non-binding, you will likely be free to appeal the award, and will not need a valid reason to appeal. However, if the arbitration was binding, you will need a valid reason to appeal the award in court. In this way, an arbitration award is similar to a jury award.

When Can I Appeal a Binding Arbitration Award?

Examples of common circumstances that will permit an appeal of a binding arbitration award may include:

  • The arbitrator went beyond their powers, as outlined in the contract’s arbitration clause;
  • The arbitrator committed prejudicial misconduct;
  • The contract containing the arbitration clause is unconscionable, or somehow otherwise void, which would render the clause unenforceable;
  • The winning party utilized fraud and/or corruption in order to obtain an arbitration decision in their favor; and/or
  • The arbitrator made a mathematical error when calculating the financial award.

What Happens If I Win an Appeal for the Arbitration Award?

If a party is allowed to appeal an arbitration award and wins that appeal, the award is vacated. If an arbitration award is vacated that means that the award is no longer valid. Additionally, the dispute that was arbitrated may then be litigated in court.

It is important to note that there is no longer a requirement that the despite must first go through the arbitration process again. Further, the arbitration decision may not then be used in civil court, as the process will begin fresh.

Should I Contact a Lawyer Regarding an Arbitration Award?

If you are involved in an arbitration, it may be in your best interests to consult with an experienced contract lawyer. Although lawyers are not required for arbitration, having an experienced contract lawyer may be beneficial in order to help you receive the best outcome in the arbitration process.

An experienced attorney can represent you in arbitration, as well as in litigation, should arbitration fail to resolve the issue. Additionally, if you need to appeal an arbitration award, an experienced attorney can help determine whether an arbitrator’s decision is binding or non-binding. Finally, an attorney will help determine your best course of legal action throughout the arbitration process, and represent you in a court, as needed.

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