Arbitration is in the news. Not just a buried paragraph in the business section, but the front page. (A three-arbitrator panel issued a 34-page arbitration award finding Major League Baseball was justified in suspending baseball player Alex Rodriguez for 162 games, which A-Rod is now trying to vacate.) My own hope is that this high-profile arbitration becomes a tool for teaching the public about arbitration. Indeed, A-Rod’s experience to date offers pointers for everyone from the arbitration novices to nerds. For example:
- Labor disputes — i.e. those between employees who are members of unions and the employer or other employees — are frequently arbitrated.
- In a case where the arbitration will be decided by three arbitrators, the agreement often provides that each party to the arbitration will choose one of the three, and only the third arbitrator will be neutral. (In this case, one of A-Rod’s complaints is that his union, the MLB Players Association, chose his arbitrator and did not allow his personal legal team to make the selection.) A-Rod’s panel was made up of the General Counsel of the Players Association, the COO of Major League Baseball, and then the impartial chair, Fredric Horowitz. (The Players Association appointee did not agree to the award.)
- Arbitration hearings do not generally proceed under either the Federal Rules of Civil Procedure or any state’s rules of civil procedure, nor do they necessarily abide by the federal or state rules of evidence. Instead, the parties’ contract dictates what rules will govern the arbitration proceeding (contracts often choose rules of the arbitration provider, like the AAA). In this case, the parties’ collective bargaining agreement set out its own rules of procedure that would govern.
- Arbitration proceedings are not necessarily confidential. A-Rod was unsuccessful in asking a federal judge to “seal” his arbitration award, i.e. keep it out of the public record. And in general, once any party goes to court to confirm or vacate an arbitration award, the award is likely to become public, even if the parties’ agreement or the arbitral rules provide for confidentiality.
- Arbitrators only have power over the parties who signed the arbitration agreement at issue, but not over third parties like media outlets. In this case, both parties complained about violations of the confidentiality clause in the parties’ agreement during the arbitration, but the arbitration award noted that “the Panel does not have authority to enjoin third parties or the media from breaching the confidentiality provisions” of the agreement.
- Arbitration awards are extremely difficult to overturn. There are only four valid bases to overturn an arbitration award under the Federal Arbitration Act. Rodriguez is arguing two of those bases (that the arbitrators refused to hear pertinent evidence and were partial to MLB). He is also arguing a basis that is not found in the FAA, but was created by judges: the arbitrator manifestly disregarded the law. Many federal courts have declared that “manifest disregard of the law” cannot be used to overturn arbitration awards (because it is not in the statute), but the federal courts in New York have continued to allow arguments that arbitrators effectively disregarded legal precedent.
By Liz Kramer