The AAA and JAMS

While this week’s reading explains that the choice to incorporate institutional rules or to develop ad hoc arrangements under which the parties conduct arbitration without institutional support “depends on the circumstances,” it also notes that “one factor in deciding whether to use non-administered arbitration is the availability to the parties of an experienced, efficient arbitrator who can shepherd the parties through the [arbitration] process.”  In this week’s blog entry, I (appropriately) assume the position of a party that does not have ready access to an experienced, efficient arbitrator who can shepherd it through the arbitration process—i.e., a party that prefers to incorporate institutional rules.

           

This week’s reading advises “arbitration counsel should know about choices in the arbitration marketplace, and make a knowledgeable selection among procedures and among organizations sponsoring arbitration.”  After all, as this week’s reading states, “the central value of arbitration is . . . the ability of users to make key process choices to suit their particular needs.”  Taking the foregoing excerpts to heart, I endeavored to gain a better understanding of different arbitral institutions.  I have expressed my efforts below.

This week’s reading notes that the “AAA and JAMS are two of the most visible arbitration ‘provider’ institutions in the United States.”  Because of their visibility, I have centered my blog entry on comparing and contrasting the AAA and JAMS.

First, it is interesting to note from the outset that the AAA “aims to move cases through arbitration . . .  in a fair and impartial manner until completion” while JAMS “aims to offer “efficiency, speed, and results.”  Surely both the AAA and JAMS seeks to accomplish identical goals, however, I find it particular interesting that the AAA highlights fairness and JAMS highlights time.

Second, in addition to hourly arbitrator rates, both the AAA and JAMS have some kind of administrative/filing fee.  The AAA, for one, charges on claim value.  Between the AAA and JAMS, the AAA is more cost-effective for claims under $5,000,000.  On the other hand, JAMS charges its administrative fee as a function of the arbitrator’s time and thus may be the most cost-effective choice for shorter arbitrations.

Third, both the AAA and JAMS do not allow arbitrators to render an award solely on the basis of default or the absence of a party.  Additionally, both the AAA and JAMS require an arbitrator to consider substantive evidence before ruling against an absent party.

Fourth, the AAA allows parties to adopt its Expedited Procedures (those procedures apply automatically to disputes under $75,000), but the procedures do not expressly limit discovery and instead generally adopt shorter timelines for the arbitration.  JAMS has a detailed set of Expedited Procedures parties can adopt that limit discovery (for example, to one deposition per party) and preclude dispositive motions.  On the other hand, for parties anticipating a more complex dispute, or needing more flexibility in discovery, both the general commercial rules of the AAA and JAMS allow the arbitrator, or arbitrators, to tailor the discovery to the needs of the case.

Fifth, the AAA and JAMS have similar, and complicated, methods for selecting arbitrators if the parties cannot agree on their own.  The number of available arbitrators varies, though.  According one website’s estimate, there are over 3,600 arbitrators on the AAA roster and approximately 150-300 arbitrators on the JAMS roster.  Apparently, the AAA is the best choice for a party seeking an excess of variety and choice.

Sixth, both the AAA and JAMS provide various, detailed areas of expertise.

Seventh, both the AAA and JAMS require their arbitrators to adhere to ethical rules.

Eighth, both the AAA and JAMS explicitly require 30 days’ time in which arbitrators must render a final award.

Ninth, the AAA does not explicitly provide for summary disposition, but the JAMS Comprehensive Arbitration rules do (the Comprehensive rules are for claims over $250,000.  JAMS has a Streamlined set of rules for claims under $250,000).  Thus, drafting parties who want to ensure the possibility of summary disposition are better off looking to JAMS’ Comprehensive rules.

Of course there are other differences and similarities between the AAA and JAMS, nonetheless, the foregoing nine paragraphs encapsulate key differences and similarities and provide valuable information that better enables users to make key process choices to suit their particular needs.

Can you think of any other key differences and similarities between the AAA and JAMS?  What do you find most appealing about the AAA?  JAMS?

Sources: 

http://www.adr.org/;

http://www.jamsadr.com/;

http://arbitrationnation.com/arbitrationnation-roadmap-when-should-you-choose-jams-aaa-or-cpr-rules/; and

the text

Dumont & P&T

Dumont and P&T

A current on-going commercial arbitration exists between Dumont Telephone Company (“Dumont”) and Power and Telephone Supply Company (“P&T”).  Dumont provides voice, video, and data telecommunications services to businesses and residential customers in Dumont, Iowa.  P&T, on the other hand, procures and sells telecommunications equipment to local telecommunication providers (such as Dumont).

This particular arbitration implicates a contract, or series of contracts, for the sale of telecommunications equipment to Dumont by P&T.  Both parties allege breach of contract.

The underlying dispute in this arbitration began in 2009.  In April 2009, in order to increase competitiveness, Dumont sought to modernize its video systems.  Dumont consulted with P&T, and P&T arranged for various equipment vendors to present their video systems to Dumont.

On April 15, 2009, P&T proposed a replacement system-called the "head-end" system that would provide Dumont’s customers with new video features that Dumont did not currently provide.

On July 2, 2009, P&T e-mailed a price quote for the head-end system to Dumont.

On July 6, 2009, P&T and Dumont discussed the quote over the phone.  During the phone discussion, the parties orally negotiated a set of terms for Dumont's initial equipment purchase, which added to, and modified, the terms in P&T's initial quote.  The parties also agreed to move forward with the head-end deal, and Dumont agreed to deliver a check to P&T for 55% of the initial equipment purchase price.

Later that day, Dumont sent an e-mail to P&T confirming the prices of the equipment in the initial order, the total price of the initial purchase, and the amount of Dumont's down-payment check.  One of the items included in Dumont’s e-mail was "I.P. Net Head End" listed at $152,471, which was the same number listed in P&T's quote.  However, Dumont's e-mail listed additional equipment not included in the quote price.  The additional equipment amounted to $18,478.80.  Adding the cost of the additional equipment to the I.P. Net Head End price, Dumont’s e-mail confirmed a total initial equipment price of $170,949.80.

The next day, June 7, 2009, Dumont gave P&T a down-payment check, which cleared Dumont's bank account on July 21, 2009.  Upon receiving the check, P&T generated an invoice reflecting the down-payment.  The invoice contained P&T's standard terms and conditions, including the following arbitration clause:

Any dispute, controversy or claim shall be solely and finally settled by arbitration conducted in Memphis, Tennessee in accordance with the Commercial Arbitration rules of the American Arbitration Association then in force.  The parties shall abide by all awards rendered in arbitration proceedings, and all such awards may be enforced and executed upon by any court having jurisdiction over the party against whom enforcement of such award is sought.

Dumont claims it never received the down-payment invoice.  P&T cannot say that it did or did not send the down-payment invoice to Dumont.

After Dumont tendered its down-payment, P&T instructed various equipment venders to begin manufacturing the parts Dumont had ordered.  The equipment was ready for shipment in October 2009.  That month, P&T delivered the equipment to Dumont.  P&T also sent Dumont an invoice for the equipment dated October 21, 2009.  This invoice also included the above arbitration clause.  Dumont acknowledges that it received this invoice.

Over the next two years, Dumont placed four additional orders with P&T for head-end equipment.  P&T fulfilled each of these orders and accompanied each with an invoice containing the above arbitration clause.  

In total, between October 2009 and September 2011, P&T sent Dumont five separate invoices covering Dumont's head-end equipment orders.  All five invoices contained the above arbitration clause.  Dumont acknowledges receiving these invoices.

While Dumont continued to order head-end equipment between 2009 and 2011, the head-end system never worked as Dumont had hoped.  Dumont received hundreds of customer complaints reporting problems with the head-end system's functionality.  According to Dumont, those problems were never resolved.  Finally, on November 13, 2012, Dumont sent P&T a letter expressing Dumont's dissatisfaction with the head-end system.  In the letter, Dumont listed the five invoices associated with the head-end system, stated that Dumont had "already paid $94,022.39 for a product that does not work," and announced that Dumont would not pay the outstanding invoices.

This week’s reading

This week’s reading states “lawyers are most often involved with arbitration pursuant to a private agreement between two or more parties.  The agreement usually provides that the arbitration award will be mutually binding and enforceable in a court of law.”  This week’s reading further states:  “it is common for contracting parties to provide that their agreement will be interpreted in accordance with the law of a particular jurisdiction.”  The arbitration clause in this case (see above) does not deviate from these norms, but rather provides for such an arbitration procedure.

It is interesting to note that this week’s reading states “business lawyers choose arbitration over litigation in a public forum for a variety of reasons:  to achieve a speedy resolution; to avoid the costs and delays of litigation; to forego expensive discovery; to escape the glare of a public proceeding; to avoid the publication of legal precedent; to choose a decision maker with pertinent business or legal expertise; or to achieve a more satisfactory or more durable resolution.”  It does not appear that the majority of the foregoing reasons are implicated in this case.

In this case, before the commencement of arbitration, there was an in-court dispute concerning the appropriateness of arbitration.  The dispute concerned whether an arbitration clause existed.  While the court ultimately ruled, on P&T’s motion to compel arbitration, that an enforceable arbitration clause existed, this dispute suggests that the risk of litigation, discovery, and public notice cannot simply be eliminated.

Additionally, in this case, it does not appear necessary to choose a decision maker with pertinent business or legal expertise.  This case appears to invoke non-complex, well-settled principles of contract law.

For the reason announced in the preceding paragraph, it also appears that there is no reason to avoid the publication of legal precedent.

Sources:  Dumont Tel. Co. v. Power & Tel. Supply Co., 2013 U.S. Dist. LEXIS 120809 (August 26, 2013) and the text.