What You Need to Know About JAMS’ Optional Arbitration Appeal Procedure

I’m often asked if it’s possible to appeal an arbitration award. The answer, quite simply, is yes. You can do so without facing the uphill battle of having to satisfy the limited grounds provided for vacating or modifying an arbitration award under state or federal law. JAMS, like two other providers^,[1] can provide an appellate panel that is empowered to review an arbitral award on grounds similar to those used for reviewing judicial awards. The catch is that the parties must agree on the right to pursue an appeal, usually but not necessarily, before the award is issued. This can be contained in the original contract providing for arbitration or introduced by the parties at some point during the arbitral process.

While expediency and finality are usually seen as advantages of arbitration, there are situations where one or both parties are unwilling to take the risk of a serious factual or legal error in the outcome. Most likely, it would be in a commercial case where a company’s existence is at stake, but it could also be in a consumer or employment contract that mandates the arbitration of disputes. Such a contract may contain a provision that if an award exceeds a certain amount, a party may seek appellate review.

JAMS established its Optional Arbitration Appeal Procedure in 2003, which empowers an appellate panel—usually comprised of three arbitrators recommended by a JAMS case manager based on their appellate experience—to review the arbitral award using the same standard of review as would a first-level appellate court in the relevant jurisdiction. That means an error of fact or law, if found, would warrant reversal in a court sitting in the jurisdiction where the arbitration occurred. CPR and AAA have also established appeal procedures, but they use the strike method of appointing panelists. Both have their own specific criteria for reversing an award and use language that the award, in order for it to be reversed, must contain material and prejudicial errors of law or be based on factual determinations that are clearly erroneous. All three providers call for the record, including exhibits, to be submitted to the appellate panel and allow for use of the original arbitration briefs during the appeal. Cross-appeals are permitted. The only situation where an item outside the record can be used is where refusal to admit the item is a basis for the appeal. Oral argument may be requested by the parties or the panel.

JAMS, like the other providers, has suggested contract language for the appeal, which includes the option to use its Optional Arbitration Appeal Procedure. That forecloses any controversy over whose appellate procedure applies since CPR, for one, allows appeals of arbitral awards that it did not grant. However, where an award met the contractual criteria for appeal, a JAMS appellate panel found, despite resistance from one party that it did not consent to using the JAMS procedure, that because the parties consented to arbitrate under JAMS rules for the initial arbitration, they consented to the use of the JAMS Optional Arbitration Appeal Procedure. 

Thus, where a party or parties are concerned about the risk of an arbitral award being wrong on law or facts but final and having no recourse to contest it, consideration should be given to the Optional Arbitration Appeal Procedure as a way of mitigating that risk while still agreeing to arbitrate. If an appellate panel is needed, it would be composed of experienced appellate judges, which should provide comfort to the parties.

^[1] See “Yes, You Can Appeal an Arbitration Award” by Joan C. Grafstein (https://www.jamsadr.com/files/uploads/documents/grafstein_appeal-arbitration-award_law360_2015-01-28.pdf) for a discussion of the appeal procedures of JAMS, AAA and CPR.