You’ve Got a Friend in Arbitration, Pennsylvania
Effective on July 1, 2019, Pennsylvania along with 18 other states adopted the Revised Uniform Arbitration Act (“RUAA”) which makes arbitration more user-friendly.
Over the years, arbitration has become an increasingly popular method of dispute resolution for claims of all sizes and complexities. From consumers to employees to smartphone users, many are required to sign mandatory arbitration agreements upon entry or access. It is important that those considering incorporating arbitration clauses into their contracts, or those subject to same, be aware of the new rules, implications, and benefits of arbitration.
Arbitration is an adjudicatory process where each side presents their case at a hearing to a neutral third party who will make a final and binding decision. While the process may be more informal than court, often conducted in a conference room, the RUAA codifies procedural safeguards to ensure that it is an expeditious, cost-effective, and efficient method of resolving disputes. Moreover, unlike in litigation, the time it takes to obtain a decision is usually substantially less than in the court. Consequently, the cost to achieve finality is also likely to be lower. Another benefit is that arbitration is private, unlike court, as many courts now offer free, online public access to case information and sometimes they allow public access to court filings and documents. Moreover, the majority of decisions in arbitration are final as the bases to appeal decisions are limited.
Arbitration first became a recognized methodology of dispute resolution in the United States almost 100 years ago through the Federal Arbitration Act. Due to the increasing popularity of arbitration, the RUAA was created to provide more procedures and provisions to standardize and control the arbitration process. Presently, many construction projects and real estate contracts are covered by standardized contracts that utilize arbitration as the primary method of dispute resolution. For instance, the American Institute of Architects (AIA) has created model construction contracts and forms that include an arbitration clause, which may be used to govern how owners, contractors, and architects will work together during the construction process.
The RUAA also attempts to bridge the gap between state and federal arbitration law to prevent conflicts. Overall, the revisions are intended to ensure that the integrity of the proceedings is protected and that arbitrators are empowered to control matters from the initiation of claims to the conclusion of contested issues.
Some of the notable changes are as follows:
Discovery: The RUAA vests arbitrators with the power to issue subpoenas, permit discovery from non-parties, order depositions, issue protective orders, award equitable relief through injunctions, and take action against noncompliant parties. The RUAA also provides that courts may enforce orders of arbitrators.
Court Guidance: The RUAA provides that courts may make “provisional remedies” to ensure the viability of arbitration, such as protecting the interests that are subject to controversy, and preventing delay in selecting an arbitrator.
Decision-Making of Arbitrator: Following selection, the RUAA empowers arbitrators with the same tools available to the courts, including the ability to make summary judgments on claims or issues, order discovery, and act accordingly to ensure the fair and expeditious disposition of proceedings.
Waiver: Unlike its predecessor, the RUAA enables parties to waive certain provisions within the Act itself.
Disclosures: The RUAA requires arbitrators to disclose known financial or personal interests including existing or past relationships with any party, their attorney(s), a witness, or another arbitrator involved in the matter. If not disclosed, such interests may constitute grounds to vacate an arbitration award.
Awards: Just like courts, arbitrators may award exemplary damages, attorneys’ fees, and costs, so long as they include a statement of law and fact for their imposition. For example, a powerful tool for consumers is the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL). The statute provides that a court may award attorney fees, costs, and treble (triple) damages. The RUAA codifies that an arbitrator may fashion such an award. The UTPCPL is a powerful tool both in its redress and application, as the Pennsylvania Supreme Court has held that the UTPCPL may be utilized by out-of-state plaintiffs alleging out-of-state injuries caused by out-of-state conduct.
The changes seek to make arbitration more user-friendly and to strengthen confidence in the process. Through the enactment of the RUAA, arbitration in Pennsylvania now shares many of the same benefits of litigation in the courts while also maintaining the principal advantages, outlined above. Moreover, the parties can agree upon an arbitrator, who is neutral and has specialized knowledge in the area of the dispute, which is not always guaranteed in alternative forums. In the construction context, for example, this could be a lawyer or an engineer.
Nevertheless, there are instances where arbitration is not preferable. For example, the Pennsylvania Home Improvement Consumer Protection Act (HICPA) provides several requirements, including but not limited to a provision electing to arbitrate a claim be in capital letters, bold-type, and signed by both parties.
Consequently, given the foregoing provisions of the RUAA, real estate professionals, commercial enterprises, and everyone should consider arbitration clauses into their contracts.