Deflategate Hearing Highlights Dangers of Arbitration Agreements

September 3, 2015 Alerts and Newsletters

Yes, there is a connection between the current wrangling over deflated footballs in Federal Court in New York and your next construction arbitration. At issue in NFL v. NFL Players Association is a narrow question – should Roger Goodell's arbitration decision imposing a four game suspension on Tom Brady and fining him $2 million be upheld or vacated? Generally, an arbitration award can only be vacated if a court finds that the arbitrator acted fraudulently, was obviously partial, or exceeded his or her power. If you have an agreement to arbitrate disputes, that standard applies whether you make your living throwing spirals to Rob Gronkowski in the end zone, or building your city's next big office tower.

Without inflaming the reader with the author's partisan feelings about the Brady case, the lesson is a simple one. When you agree to arbitrate disputes, you are effectively giving up the right to appeal a bad outcome to a higher court. In even simpler terms, you are almost always stuck with an arbitration award. In the vast majority of cases, no matter how irrational the arbitrator's decision, that decision will be upheld by a reviewing court. Judge Richard Berman's decision vacating Commissioner Goodell's arbitration order is the exception to the rule that, for better or worse, judges rarely vacate arbitration awards. The federal and state statutes which enable and promote arbitration expressly limit the scope of judicial review of arbitration awards.

None of this is to say that arbitration is a bad idea. For many (maybe most) construction disputes, arbitration remains the best and cheapest way to reach a resolution. The tradeoffs between efficiency, finality and process work well in most construction disputes. However, the agreement to arbitrate should not be taken for granted. Know what you are getting into and, when in doubt, check with your construction lawyer to make sure you don't get sacked.

This communication is intended for general information purposes and as a service to clients and friends of Verrill Dana, LLP. This publication, which may be considered advertising under the ethical rules of certain jurisdictions, should not be construed as legal advice or a legal opinion on any specific facts or circumstances, nor does it create attorney-client privilege.

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