Arbitration Commercial Arbitration Practice 2 — Questions and Answers
Question 1: What does 'unconscionability' mean when raised as a defense to an arbitration clause?
- The arbitration clause was not initialed by both parties
- The arbitration clause is so one-sided or oppressive that a court refuses to enforce it (Correct answer)
- The arbitration clause fails to specify a seat
- The clause was added after the contract was signed
Correct answer: The arbitration clause is so one-sided or oppressive that a court refuses to enforce it
Unconscionability is a contract defense that can render an arbitration clause unenforceable if it is both procedurally unfair (e.g., buried fine print) and substantively one-sided.
Question 2: What is 'JAMS' in the context of US commercial arbitration?
- A federal agency overseeing arbitration
- A major private dispute resolution organization offering arbitration and mediation services (Correct answer)
- A software platform for online arbitration
- A bar association committee on arbitration standards
Correct answer: A major private dispute resolution organization offering arbitration and mediation services
JAMS (Judicial Arbitration and Mediation Services) is one of the largest private dispute resolution providers in the US, offering arbitration and mediation under its own rule sets.
Question 3: What is the significance of 'scope of the arbitration agreement' in commercial disputes?
- It limits which arbitrators may be selected
- It determines which disputes must be submitted to arbitration versus litigation (Correct answer)
- It sets the maximum damages the arbitrator may award
- It governs how many rounds of briefing are permitted
Correct answer: It determines which disputes must be submitted to arbitration versus litigation
The scope of the arbitration agreement defines which claims and disputes fall within the mandatory arbitration requirement, a question of contract interpretation resolved by courts or arbitrators.
Question 4: What is a 'high-low agreement' in commercial arbitration?
- An agreement that the award will be no lower than a minimum and no higher than a maximum, regardless of the arbitrator's decision (Correct answer)
- An agreement between parties to alternate between high and low arbitrator tiers
- A two-tier fee agreement with the arbitrator
- A provision restricting punitive damages to a fixed range
Correct answer: An agreement that the award will be no lower than a minimum and no higher than a maximum, regardless of the arbitrator's decision
A high-low agreement sets a floor and ceiling on the arbitral award; if the award falls below the floor the claimant gets the minimum, if above the ceiling the respondent pays only the maximum.
Question 5: Under the AAA Commercial Rules, what is the 'Expedited Procedures' threshold (as of recent rules)?
- Claims of $10,000 or less
- Claims of $25,000 or less
- Claims of $75,000 or less (Correct answer)
- Claims of $100,000 or less
Correct answer: Claims of $75,000 or less
Under AAA Commercial Rules, Expedited Procedures apply to cases where no claims exceed $75,000, providing streamlined timelines and simplified processes for smaller disputes.
Question 6: What is 'baseball arbitration' (final-offer arbitration)?
- Arbitration conducted by retired sports arbitrators
- Each party submits a final number; the arbitrator must choose one of the two without compromise (Correct answer)
- Arbitration with a fixed three-inning format
- Binding arbitration with a mandatory 14-day cooling-off period
Correct answer: Each party submits a final number; the arbitrator must choose one of the two without compromise
In baseball arbitration, each party submits its best final offer and the arbitrator must adopt one figure entirely, incentivizing parties to make reasonable offers rather than extreme positions.
Arbitration Commercial Arbitration Practice 2
What does 'unconscionability' mean when raised as a defense to an arbitration clause?