American Arbitration Association Arbitration

The American Arbitration Association (AAA) is a well-known alternative dispute resolution forum. The purpose of this post is to provide general information relative to the AAA. This information is not designed to be complete in all material respects. It is being provided for informational purposes only and should not be relied upon as legal advice. If you have any questions concerning the AAA, you should contact experienced arbitration counsel.

The AAA is a not-for-profit organization that was founded in 1926, following enactment of the Federal Arbitration Act, with the specific goal of helping to implement arbitration as an out-of-court solution to resolving disputes. This legal framework was passed by Congress and signed by President Calvin Coolidge.

The AAA, like all independent arbitration associations, is dedicated to the development and widespread use of prompt, effective and economical methods of dispute resolution.

Currently, the AAA is the largest alternative dispute resolution service in the United States. It has a network of offices throughout the US and an office in Dublin, Ireland. The AAA administers approximately 150,000 cases each year.

Arbitration is a matter of contract. Article 1 section 2, of the Federal Arbitration Act (FAA), generally provides that a written provision in a contract evidencing a transaction involving interstate commerce shall be valid, irrevocable and enforceable except for such grounds as exist in law for the revocation of any contract.

A number of years ago many brokerage firm customer agreements contained arbitration provisions that not only included arbitration before FINRA arbitration panels but also before the American Arbitration Association. Gradually, this option was deleted from brokerage firm’s customer agreements, which precluded the use of the AAA in broker/customer disputes. Yet, in other types of investment transactions, the use of AAA arbitrations is the preferred type of alternative dispute resolution forum.

For example, many types of private investment transactions require investors to sign a subscription or other type of document, which contains a pre-dispute arbitration agreement requiring AAA dispute resolution. Also, agreements relating to commercial transactions such as shareholder and membership agreements generally contain pre-dispute arbitration agreements, which require AAA arbitration.

Consequently, before filing a lawsuit, it is important to review all of your investment documents to see whether any of them contain a pre-dispute arbitration agreement. If any of these documents do contain such an agreement, it is then necessary to review the scope of the arbitration agreement to see whether or not the particular dispute falls within the purview of the terms of the arbitration language.

For example, the following language demonstrates a fairly all encompassing arbitration provision:

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

However, what happens if you, as the claimant, decide that you not only want to file a claim against the company with which you have the agreement, containing the pre-dispute arbitration agreement, but also against an officer, agent or employee of the firm? Does the above quoted language provide for this or do you have to try and accomplish this result in another way? To have this questioned answered, you should contact an attorney experienced in these types of issues.

Note: One of the business areas where we are currently seeing the use of pre-dispute arbitration agreements, requiring arbitration to take place in Broward County, Florida are documents between customers of precious metals firms, especially in the areas of leveraged transaction in gold, silver, platinum and palladium.

The below items reference generally how a commercial arbitration is commenced and how the arbitration panel is appointed:

An AAA arbitration under a pre-dispute arbitration provision in a contract is instituted by the claimant filing a demand for arbitration which contains a statement setting forth the nature of the dispute, the names and addresses of all other parties, the amount involved, if any, the remedy sought and the hearing local requested.

After service of the demand, a respondent may file an answer, including affirmative defenses with the AAA, with a copy to the claimant. If a counter-claim is asserted, it must contain a statement detailing the nature of the counterclaim, the amount involved, if any, and the remedy sought. If no answer is filed within the required time, the respondent will be deemed to have denied the claim.

Subsequent to the filing of a claim, if either party desires to make a new or different claim or counterclaim, it must be made in writing and filed with the AAA, with a copy to the opposing side which shall have 15 days to file an answer thereto. After the panel is appointed, however, no new or different claim may be submitted except with the arbitrator’s consent.

The panel, which is usually comprised of 1 or 3 arbitrators can either be agreed upon by the parties or appointed in the following manner:

1. The AAA shall send simultaneously to each party to the dispute an identical list of 10 (unless the AAA decides that a different number is appropriate) names of persons chosen from the National Roster. The parties are encouraged to agree to an arbitrator from the submitted list and to advise the AAA of their agreement.
2. If the parties are unable to agree upon an arbitrator, each party to the dispute shall have 15 days from the transmittal date in which to strike names objected to, number the remaining names in order of preference, and return the list to the AAA. If a party does not return the list within the time specified, all persons named therein shall be deemed acceptable. From among the persons who have been approved on both lists, and in accordance with the designated order of mutual preference, the AAA shall invite the acceptance of an arbitrator to serve. If the parties fail to agree on any of the persons named, or if acceptable arbitrators are unable to act, or if for any other reason the appointment cannot be made from the submitted lists, the AAA shall have the power to make the appointment from among other members of the National Roster without the submission of additional lists.
3. Unless the parties agree otherwise when there are two or more claimants or two or more respondents, the AAA may appoint all the arbitrators.
4. Notwithstanding the above, if the agreement of the parties names an arbitrator or specifies a method of appointing an arbitrator, that designation or method shall be followed. However, if the parties have named an arbitrator, the arbitrator so named must meet the standards of Section R-17, of the commercial rules, with respect to impartiality and independence unless the parties agree otherwise.

The commercial arbitration rules require that any person appointed or to be appointed as an arbitrator shall disclose to the AAA any circumstance likely to give rise to justifiable doubt as to the arbitrator’s impartiality or independence, including any bias or any financial or personal interest in the result of the arbitration or any past or present relationship with the parties or their representatives. Such obligation shall remain in effect throughout the arbitration.

A complete set of rules can be viewed on the AAA website. These rules not only specifically relate to what we have referenced above but cover the entire process. Consequently, in commercial business disputes or in securities, commodities or precious metals related matters, it is as equally important, as it is in court proceedings, to have experienced counsel representing your interests.

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.