June 16, 2014 Articles

What Constitutes Arbitration for Federal Arbitration Act Purposes?

By Asa Lopatin

The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1–16, codifies the federal policy of enforcing arbitration agreements. In Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983), the Supreme Court noted that "Section 2 [of the Act] is a congressional declaration of a liberal federal policy favoring arbitration, notwithstanding any state substantive or procedural policies to the contrary. The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the act." 460 U.S. at 24.

Arbitration has a number of elements that lend to its reputation for efficiency and expediency, including traditionally faster timelines and therefore lower costs for case resolution; limited grounds for overturning awards (see generally 9 U.S.C. § 10); strong protections for arbitrators, (see Wasyl, Inc. et al. v. First. Boston Corp., 813 F.2d 1579, 1582 (9th Cir. 1987) ("While the Act does not so provide, case law dictates that arbitrators are immune from civil liability for acts within their jurisdiction arising out of their arbitral functions in contractually agreed upon arbitration hearings.")); and the right to petition a court to issue an order immediately staying court proceedings and compelling contracted-for arbitration, 9 U.S.C. §§ 34—as well as unique rights for interlocutory appeals when such an order is denied. With respect to arbitration's favored status, the Third Circuit noted in Ballay v. Legg Mason Wood Walker, 878 F.2d 729 (3d Cir. 1989), that amendments to the FAA "make[] clear that any order favoring litigation over arbitration is immediately appealable and any order favoring arbitration over litigation is not."  878 F.2d at 732.

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