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New Arbitration Appellate Procedures Change Playing Field

By Charles S. Modell and Sawan S. Patel
April 02, 2014

Franchisors have historically struggled with whether to include provisions calling for mandatory arbitration of all franchise disputes in their franchise agreements. One of the main complaints about arbitration from franchisors and franchisees alike ' and a reason many franchisors opt not to include arbitration provisions in their franchise agreements ' has been the lack of an effective appeal process. Until recently, arbitration awards obtained under the American Arbitration Association (AAA) Arbitration Rules could only be appealed through the courts, and only for very limited and uncommon reasons ' generally, arbitrator bias or an arbitrator's refusal to allow a party to submit appropriate evidence. If the arbitrator blatantly ignored the law or facts, there was little a party could do.

The rules have now changed for franchisors attuned to the recent amendment of the AAA's Arbitration Rules. Under the AAA's new Optional Appellate Arbitration Rules (New Rules), which became effective on Nov. 1, 2013, parties can now appeal arbitration awards for errors of law made by the arbitrator that are material and prejudicial, and for determinations of fact by an arbitrator that are clearly erroneous.

The Processes

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