Arbitration provides an alternative for resolving disputes outside of the traditional litigation process. Minnesota has adopted the Revised Uniform Arbitration Act (RUAA) which provides the framework for the arbitration of purely intrastate disputes. For those transactions involving interstate commerce, the Federal Arbitration Act (FAA) controls. A fundamental objective of these laws is to encourage and facilitate the arbitration of disputes by providing speedy, informal, and relatively inexpensive procedures for resolving disputes.
Whether a dispute goes to arbitration is dependent on the presence of an arbitration agreement and whether the dispute falls within that agreement. The arbitration agreement is interpreted using contract principles, often with reference to the applicable Arbitration Act. Therefore, the exact nature of any individual case involving arbitration is dependent on the terms of the arbitration agreement between the parties.
Sources of Law
In practice, arbitration law involves a blend of contract law, statutory law, and judicial proceedings.
The right to arbitrate is governed by contract, and the parties may fashion whatever agreement they wish to limit the scope of the agreement. For example, the parties to the agreement may restrict the arbitration to certain issues or they may comprehensively provide that all disputes may be referable to arbitration. The parties may also select an arbitrator in their agreement or may provide a process for determining an appropriate arbitrator. In addition to the determination of an arbitrator, the language of the arbitration agreement defines the scope of the arbitrator’s power as well as the process to be used throughout.
Application of Statutes
- The Federal Arbitration Act – The U.S. Supreme Court has found that the FAA applies to all arbitrations involving interstate commerce and that interstate commerce broadly includes virtually all types of agreements and transactions. Federal arbitration law preempts contrary or restrictive state statutes and state judicial decisions in interstate commerce cases.
- The Minnesota Revised Uniform Arbitration Act – Minnesota has adopted the RUAA in Minn. Stat. §§ 572B.01 to 572B.31. Although parties are free to determine much of the arbitration process under general contract principles, in the absence of a contrary agreement between the parties, written agreements to arbitrate are interpreted with reference to the [Revised] Uniform Arbitration Act.
Minnesota law strongly favors arbitration in instances where an arbitration agreement is present. An agreement to arbitrate any controversy arising between the parties is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of contract.
Judicial courts usually have a limited role in arbitration but typically become involved in arbitration issues in two primary instances: (1) in deciding a motion to stay or compel arbitration at the start of an arbitration case and (2) in confirming an award into an enforceable civil judgment or determining whether to vacate or modify an arbitration award.
Common Arbitration Issues
Enforcement of Arbitration Clause
A common issue is a disagreement between the parties as to whether the dispute should go to arbitration or proceed through the traditional civil process. In deciding whether arbitration is proper and should proceed, two questions must be answered: (1) whether there is a valid agreement to arbitrate; and (2) whether the dispute falls within the agreement. In answering these questions, doubts about arbitrability must be resolved in favor of arbitration and the party resisting the arbitration bears the burden of proving arbitration is improper. If a valid arbitration agreement exists, the court must compel a party to arbitrate the dispute.
Scope of Arbitrator’s Authority
A common issue is the nature and extent of the arbitrator’s ability to grant relief. The arbitrator cannot exceed the authority granted beyond what could reasonably be interpreted from the arbitration agreement. Both the RUAA and the FAA contemplate that equitable as well as legal remedies are available in arbitration. An arbitrator is the final judge of both law and fact, whose award is subject to judicial review on limited grounds.
Defenses to Avoid Arbitration
The challenges to an agreement to arbitrate include lack of consideration, fraud in the inducement, waiver, laches, or statute of limitations. However challenges to arbitration agreements can prove difficult because a written agreement to arbitrate is presumptively “valid, enforceable, and irrevocable” under Minn. Stat. § 572B.06(a). Courts have upheld arbitration agreements even under circumstances that typically warrant heightened judicial scrutiny, such as contracts of adhesion.
Arbitration results as an agreement between the contracting parties and is usually interpreted with reference to the RUAA. The parties to the arbitration agreement have the power to determine its nature and scope under general contract principles. In Minnesota, arbitration is favored under the law; a written agreement to arbitrate is presumptively valid, enforceable, and irrevocable.