Arbitration and Expedited or Emergency Relief?
Does the arbitration provision in your contract expressly provide for expedited discovery and emergency relief? If not, you may find yourself in arbitration versus judicial forum limbo if your case demands such actions to protect your company’s rights. Emergency relief may include relief such as motions for temporary restraining orders, preliminary injunctions, or attachment. These types of relief require the urgent and immediate consideration and resolution by an arbitrator or court. These measures routinely require shortened times to answer, respond to discovery or take depositions.
When might these types of relief be necessary? For example, if your contract with another company has a trade secrets provision, what are the immediate steps that can be taken if it becomes evident that trade secrets are being leaked by the other company and the contract has an arbitration clause? If the contract did not provide for arbitration, you could seek emergency injunctive relief from a judge.
If the contract does provide for arbitration, you must look at the contract’s arbitration provision and the arbitration rules adopted by the contract between the parties to determine if you can obtain emergency relief in the arbitral forum.
Under the AAA Commercial Arbitration Rules, Parties Must Opt Into Expedited Relief and Emergency Provisions.
Many arbitration provisions routinely adopt the then-current Commercial Arbitration Rules and Mediation Procedures (“Rules”) of the American Arbitration Association (“AAA”). The AAA requires the parties to opt into the expedited procedures if you want the option of expediting the matter in cases with claims in excess of $75,000 or with more than two parties. With respect to expedited procedures, the Rules provide:
“Unless the parties or the AAA determines otherwise, the Expedited Procedures shall apply in any case in which no disclosed claim or counterclaim exceeds $75,000 exclusive of interest, arbitration fees or costs. Parties may also agree that these rules apply in larger cases. Unless the parties agree otherwise, rules will not apply in cases where there are more than two parties.”
Likewise, the AAA requires the parties to opt into allowing the arbitrator to grant emergency relief such as restraining orders. “The parties agree that the Optional Rules for Emergency Measures of Protection shall apply to the proceedings.”
If the parties do not expressly adopt the provisions identified, the only way to obtain such emergency relief is to seek it from a judicial forum. Whether a court will find that it has the power to order such relief in light of the arbitration provision will be dependent on what state’s law applies. The majority position is that the court will find that it does. However, where such case will be tried may be dependent on a forum selection clause or choice of law provision that may appear in the contract. You may end up litigating in a court applying law that may not be favorable. Furthermore, there may be a delay in obtaining emergency relief if the court must first analyze whether it has power to grant emergency relief in view of the arbitration provision, especially if the arbitration provision states that it is to be the “exclusive” forum.
Under the AAA or ICC International Arbitration Rules, Emergency Provisions are Automatically Included Unless Excluded.
On the other hand, if the contract is between international parties and the parties adopt either the International Dispute Resolution Procedures of the AAA or the International Chamber of Commerce (“ICC”) Rules of Arbitration, the parties must opt out of the emergency arbitration procedures which are automatically provided under both sets of those rules if the parties do not want such relief available in the selected arbitration forum. However, obtaining such relief in a court located in a foreign jurisdiction will likely be a procedural and substantive morass.
PRACTICE POINTER: Do not simply adopt arbitration provisions without carefully analyzing whether you can obtain efficient emergency relief if necessary if a dispute arises.
Read the Full Newsletter: Technology & Intellectual Property Law Update August 15, 2013