The FAA and the RUAA

This week’s reading discusses both the FAA and the RUAA.  In this blog entry, the FAA and the RUAA will be compared and contrasted.  First, brief introductions of both the FAA and the RUAA are warranted.

The FAA is described as “relatively brief” and applies where the parties in arbitration engage in interstate commerce.  “The FAA is aimed at regulating the interface between the private forum of arbitration and the courts, with primary emphasis on the judicial enforcement of agreements to arbitrate and of resulting arbitration awards.  It promotes the autonomy of parties by enforcing their agreements to arbitrate.  It also serves channeling, evidentiary, and cautionary functions by judicially enforcing only those agreements evidenced by a writing or record, and against which no valid defense can be asserted.  Finally, it establishes supplementary or default terms for different aspects of arbitration processes.”

On the other hand, the RUAA, a model arbitration act adopted by "[t]he overwhelming majority of states,” is described as “a much lengthier, more detailed, and more prescriptive statutory framework for arbitration.  These include a number of provisions setting forth default procedural elements---some of which are non-waivable by parties."

With the above introductions in mind, we can already compare and contrast the FAA and the RUAA on a few points.  Both the FAA and the RUAA are sources of arbitration law.  The FAA is relatively brief, while the RUAA is more detailed.  The FAA is federal law, while the RUAA is state law (for states that have adopted it); the FAA doesn’t apply where the parties in arbitration do not engage in interstate commerce.

Ok, so we can identify basic similarities and differences between the FAA and the RUAA, what about specific statutory similarities and differences?  In order to identify these similarities and differences, arbitrability under the FAA will be compared and contrasted with arbitrability under the RUAA as adopted by Utah.

First, Section 78-31a-107(1) of the Utah RUAA restates a central proposition:  that agreements to arbitrate are "enforceable ... except upon a ground that exists at law or in equity for the revocation of contract."  This is also a central to the FAA; it’s expressed in Section 2 of the FAA.

Second, Section 78-31a-107(2) and (3) defines who decides the important issue of arbitrability when the parties themselves have not decided.  Matters of substantive arbitrability; i.e., "whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate," are for the courts to decide.  Matters of procedural arbitrability; i.e., "whether a condition precedent to arbitrability has been fulfilled," are for the arbitrator to decide.  While not expressly announced in the FAA’s statutory framework, this dichotomy about who determines substantive and procedural arbitrability follows the approach under the FAA; this is shown in First Options of Chicago, Inc. c. Kaplan, as reproduced in the book.

Third, although the general rule in section 78-31a-107(2) is that the court decides substantive arbitrability, the parties may agree that the arbitrator shall make this determination.  Arbitration organizations, such as the American Arbitration Association and the International Chamber of Commerce, provide that arbitrators rather than courts make the initial determination of substantive arbitrability.  Again, this does not differ from the FAA; this is again shown in First Options of Chicago, Inc. c. Kaplan, as reproduced in the book.

Fourth, Utah Code Ann. subsection 78-31a-127(1) defines jurisdiction to enforce arbitration agreements.  Section 78-31a-127(1) grants power to enforce an arbitration agreement in Utah courts with personal and subject matter jurisdiction over the controversy.  This provision appears more detailed than the FAA; the FAA does not attempt to define a court’s jurisdiction, rather it generally speaks of the enforceability of an arbitration agreement in Section 2.  However, decisions under the FAA have made “agreements to arbitrate fully enforceable in both federal and state courts.”

Fifth, Section 78-31a-127(2) deals with jurisdiction to enter judgment on an arbitration award.  It provides that an agreement providing for arbitration in a particular state confers "exclusive jurisdiction" on the courts of that state to enter judgment.  Section 78-31a-123 allows a party to file a motion with to the court to confirm an award.  The FAA also speaks of jurisdiction to enter judgment on an arbitration award; however, the FAA only does so if the parties agree to entry.

As shown above, the RUAA is certainty more detailed than the FAA, but it does not appear to conflict with the FAA at any point; it appears to merely codify judicial decisions and enact rules that expand upon, but don’t otherwise disagree with, the FAA.  This is not surprising with preemption concerns looming over head:  Why would the drafters of a model act, weary of preemption, roll the dice in drafting an act that conflicts with the FAA?  It wouldn’t (at least intentionally).  Or as the Pennsylvania Bar Associations puts it, “[t]he RUA continues the goal . . . to provide uniformity in law as it aligns state law with federal law in order to decrease the potential for litigation on preemption grounds.”

Which do you prefer, the FAA or the RUAA?  A bare-bones statutory framework, or a more detailed statutory framework?  What are the pros and cons of each?

Sources:

The Book;

The FAA;

http://le.utah.gov/~2002/bills/sbillenr/sb0171.htm;

http://webster.utahbar.org/barjournal/2003/12/utahs_revised_uniform_arbitrat.html; and http://www.pabar.org/public/committees/dispreso/PA%20should%20adopt%20the%20RUAA.pdf