By Earlene R. Baggett-Hayes
Background
This article provides information on various types of remedies which may be available during arbitration. While it is impossible to fully address all remedies, the intent is to offer an overview of remedies available to advocates, that allows them to request certain remedies be awarded, and to arbitrators for consideration after making decisions on the merits of a case.
Arbitration is a form of alternative dispute resolution (ADR) in which parties submit their case to a neutral third party known as an arbitrator. The arbitrator renders a decision that resolves the dispute outside of court. The arbitrator’s authority is granted by the parties and is typically governed by contract or applicable law. The arbitration process is intended to be expeditious, efficient, inexpensive, and streamlined. Arbitrators have broad authority, and final awards are usually binding.
A remedy is a means by which an arbitrator enforces a right, compensates for a harm, or prevents further wrongdoing. A remedy provides relief to a party who has suffered a wrong. The purpose of the remedy is to restore the injured party to its rightful position.
Arbitrators may fashion creative and customized remedies based on the outcome of an arbitration. While arbitrators have broad authority, there may be provisions in a contract or legal tenets that narrow the scope of their authority in fashioning remedies. Ultimately, remedies imposed by arbitrators should be fashioned to ensure outcomes are fair, enforceable, and consistent with legal standards.
During arbitration, the advocates are expected to clearly request and justify the remedies they seek. They must endeavor to convince the arbitrator through evidence, exhibits, and testimony of the appropriate remedies to be assigned. Advocates should utilize flexibility in crafting and requesting remedies to coincide with specific situations and to compensate for harm or violations.
Arbitrator Authority
When parties invoke arbitration, it is generally pursuant to an arbitration agreement, court order, or contract. Whatever the source, the instrument grants the arbitrators’ authority.
Arbitrations typically have a request for remedial action, or a statement of the remedy being pursued. Arbitrators are vested with the power to render the ultimate decision.
Sometimes, Arbitrators’ authority is restricted by existing limitations on remedies. For instance, arbitrators may be subject to specific terms in an arbitration agreement. Or, statutory caps may set maximum amounts on damages that may be awarded, or jurisdictional restrictions may exist.
It is also important to recognize that remedial frameworks may vary depending on the venue where they were invoked. Those venues may be in the commercial, construction, employment, labor, or international arenas, to name a few, and may involve public or private disputes. Some institutions, such as the American Arbitration Association (AAA) or the Judicial Arbitration and Mediation Services (JAMS), have established arbitration procedures.
In awarding remedies, arbitrators may differ. Some arbitrators restrict remedies to what the parties request. Others deviate from the requested remedies and resort to their own brand of justice, which is often risky. The concern is that arbitrators do not always recognize the potentially far-reaching ramifications of delving into unaddressed areas to manufacture remedies, and the manufactured remedial package was not requested.
Below is a summary of various types of remedies. While examples are provided to further explicate the remedies, it is noteworthy that the appropriateness of various remedies varies across venues and legal practice areas.
Monetary Damages and Equitable Relief
Monetary damages are the most common type of remedial relief. They are often referred to as “make-whole” remedies and are frequently awarded in employment and commercial cases, among others. Monetary damages are awarded to compensate for losses incurred and are based on actual damages suffered. Examples of monetary damages are back pay and payment for missed overtime. In a make-whole award, a wronged employee may also receive other remedies that may exceed monetary payments and range from a transfer, a promotion, training, a different job, a different shift, counseling, or company assets. For example, in a sexual harassment case where the allegations were proven to be false, the alleged harasser’s remedial package included his return to work, restoration of all lost benefits, back pay, pay for missed overtime, and full seniority rights. In that case, he was also reinstated to his former job, and his record was cleared.
Equitable Relief is a non-monetary remedy requiring a party to perform certain acts or to refrain from acting when money damages may be inadequate in achieving fairness. Two primary forms of equitable remedies are specific performance and injunctive relief.
A specific performance remedy compels a party to perform a certain act or carry out obligations, particularly in situations where monetary damages are insufficient. For example, an arbitrator’s remedy award may require the removal of a bank of 100 trees and all debris pursuant to a clear contract term.
Injunctions are awarded as remedies to stop or enjoin certain activities. Injunctive relief can be either temporary or permanent. For example, an arbitrator may enjoin a party from advertising and selling artwork where ownership is disputed.
Arbitrators can also cancel or rescind contracts or provisions therein and place the parties back in their pre-contract positions. This remedy is referred to as rescission. The arbitrator may require not only the cancellation of the contract but also the return of all payments made by the parties.
Other Considerations
Punitive damages are viewed as remedies to punish the aggressor. Punitive damages typically exceed payment for the wrong committed. Punitive damages are typically frowned upon in the labor arena because the goal is to place the aggrieved party back in the position they would have been in. Other venues are more receptive to punitive damages. Arbitrators have awarded punitive damages where a contract has provided clear and express authority to do so, or where significant bad faith is proven, or where the accused knowingly or repeatedly committed bad acts.
Consequential damages have been the subject of debate in recent years. Consequential damages do not necessarily represent “direct” wrongs or injuries. Rather, they are damages suffered as an “indirect” result of a wrong. For example, a wronged employee may complain that, after his discharge, his new job’s out-of-state travel requirements forced his spouse to quit her job, resulting in a significant loss of family income. Another example was when a company lost five (5) essential customers after non-conforming goods required time-consuming re-fabrication. To recover consequential damages, a party must establish that a causal relationship existed between the breach and the benefit that was lost. In addition, the damages must flow naturally from the breach. The connection between the two events typically engenders much debate. If the loss is one that a party was likely to
experience notwithstanding, then remedies for consequential damages are not recoverable.
Procedural violations may also justify remedial attention. Examples of procedural violations in the employment arena include failures to comply with due process obligations or other rules. Although the failure to comply may not always overcome the employee’s violation, for example, the discharge, some arbitrators may award remedies such as compensation between the time of the violation and the arbitration hearing, or between the violation and the removal action, or from the time of management’s procedural violation.
Interest is usually not awarded as a remedy unless express laws or contract provisions provide for it. Federal agencies are more inclined to provide for the payment of interest on an assigned remedy. In many forums, arbitrators do not include interest unless a party has requested it. This is not the case in arenas such as personal injury or auto negligence cases. The growing trend is for parties to specifically request that interest be included with an arbitration award.
Parties sometimes request that litigation costs and attorney fees be awarded as a portion of the remedy. Except in venues where costs and attorney fees are governed by contract or law, costs for the actual litigation or hearing are typically split between the parties unless mutually agreed otherwise.
Interim awards, even if non-monetary, may be granted prior to a final award being issued. Interim awards may be granted to prevent the disclosure of trade secrets or confidential information. They may also be granted to “stop the bleeding” until a final award is issued, such as in the case of a manufacturing part used to build automobiles, even though the arbitration involves patent issues.
Summary
In addressing remedies in arbitration, it is important for arbitrators and advocates to understand the nature of the potential remedies, determine whether the remedies are applicable and justifiable, and whether they are governed by applicable law or contract to protect both the clients’ rights and the arbitration process.
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References: Fed. Arb. Act, U.S. Code, Title 9; AAA Arbitration Rules, JAMS Arbitration Rules, Remedies in Arbitration, Hill & Sinicropi.
————————
Earlene Baggett-Hayes is a senior member of Professional Resolution Experts of Michigan (PREMI), a premier group of seasoned invitation-only arbitrators and mediators.
Background
This article provides information on various types of remedies which may be available during arbitration. While it is impossible to fully address all remedies, the intent is to offer an overview of remedies available to advocates, that allows them to request certain remedies be awarded, and to arbitrators for consideration after making decisions on the merits of a case.
Arbitration is a form of alternative dispute resolution (ADR) in which parties submit their case to a neutral third party known as an arbitrator. The arbitrator renders a decision that resolves the dispute outside of court. The arbitrator’s authority is granted by the parties and is typically governed by contract or applicable law. The arbitration process is intended to be expeditious, efficient, inexpensive, and streamlined. Arbitrators have broad authority, and final awards are usually binding.
A remedy is a means by which an arbitrator enforces a right, compensates for a harm, or prevents further wrongdoing. A remedy provides relief to a party who has suffered a wrong. The purpose of the remedy is to restore the injured party to its rightful position.
Arbitrators may fashion creative and customized remedies based on the outcome of an arbitration. While arbitrators have broad authority, there may be provisions in a contract or legal tenets that narrow the scope of their authority in fashioning remedies. Ultimately, remedies imposed by arbitrators should be fashioned to ensure outcomes are fair, enforceable, and consistent with legal standards.
During arbitration, the advocates are expected to clearly request and justify the remedies they seek. They must endeavor to convince the arbitrator through evidence, exhibits, and testimony of the appropriate remedies to be assigned. Advocates should utilize flexibility in crafting and requesting remedies to coincide with specific situations and to compensate for harm or violations.
Arbitrator Authority
When parties invoke arbitration, it is generally pursuant to an arbitration agreement, court order, or contract. Whatever the source, the instrument grants the arbitrators’ authority.
Arbitrations typically have a request for remedial action, or a statement of the remedy being pursued. Arbitrators are vested with the power to render the ultimate decision.
Sometimes, Arbitrators’ authority is restricted by existing limitations on remedies. For instance, arbitrators may be subject to specific terms in an arbitration agreement. Or, statutory caps may set maximum amounts on damages that may be awarded, or jurisdictional restrictions may exist.
It is also important to recognize that remedial frameworks may vary depending on the venue where they were invoked. Those venues may be in the commercial, construction, employment, labor, or international arenas, to name a few, and may involve public or private disputes. Some institutions, such as the American Arbitration Association (AAA) or the Judicial Arbitration and Mediation Services (JAMS), have established arbitration procedures.
In awarding remedies, arbitrators may differ. Some arbitrators restrict remedies to what the parties request. Others deviate from the requested remedies and resort to their own brand of justice, which is often risky. The concern is that arbitrators do not always recognize the potentially far-reaching ramifications of delving into unaddressed areas to manufacture remedies, and the manufactured remedial package was not requested.
Below is a summary of various types of remedies. While examples are provided to further explicate the remedies, it is noteworthy that the appropriateness of various remedies varies across venues and legal practice areas.
Monetary Damages and Equitable Relief
Monetary damages are the most common type of remedial relief. They are often referred to as “make-whole” remedies and are frequently awarded in employment and commercial cases, among others. Monetary damages are awarded to compensate for losses incurred and are based on actual damages suffered. Examples of monetary damages are back pay and payment for missed overtime. In a make-whole award, a wronged employee may also receive other remedies that may exceed monetary payments and range from a transfer, a promotion, training, a different job, a different shift, counseling, or company assets. For example, in a sexual harassment case where the allegations were proven to be false, the alleged harasser’s remedial package included his return to work, restoration of all lost benefits, back pay, pay for missed overtime, and full seniority rights. In that case, he was also reinstated to his former job, and his record was cleared.
Equitable Relief is a non-monetary remedy requiring a party to perform certain acts or to refrain from acting when money damages may be inadequate in achieving fairness. Two primary forms of equitable remedies are specific performance and injunctive relief.
A specific performance remedy compels a party to perform a certain act or carry out obligations, particularly in situations where monetary damages are insufficient. For example, an arbitrator’s remedy award may require the removal of a bank of 100 trees and all debris pursuant to a clear contract term.
Injunctions are awarded as remedies to stop or enjoin certain activities. Injunctive relief can be either temporary or permanent. For example, an arbitrator may enjoin a party from advertising and selling artwork where ownership is disputed.
Arbitrators can also cancel or rescind contracts or provisions therein and place the parties back in their pre-contract positions. This remedy is referred to as rescission. The arbitrator may require not only the cancellation of the contract but also the return of all payments made by the parties.
Other Considerations
Punitive damages are viewed as remedies to punish the aggressor. Punitive damages typically exceed payment for the wrong committed. Punitive damages are typically frowned upon in the labor arena because the goal is to place the aggrieved party back in the position they would have been in. Other venues are more receptive to punitive damages. Arbitrators have awarded punitive damages where a contract has provided clear and express authority to do so, or where significant bad faith is proven, or where the accused knowingly or repeatedly committed bad acts.
Consequential damages have been the subject of debate in recent years. Consequential damages do not necessarily represent “direct” wrongs or injuries. Rather, they are damages suffered as an “indirect” result of a wrong. For example, a wronged employee may complain that, after his discharge, his new job’s out-of-state travel requirements forced his spouse to quit her job, resulting in a significant loss of family income. Another example was when a company lost five (5) essential customers after non-conforming goods required time-consuming re-fabrication. To recover consequential damages, a party must establish that a causal relationship existed between the breach and the benefit that was lost. In addition, the damages must flow naturally from the breach. The connection between the two events typically engenders much debate. If the loss is one that a party was likely to
experience notwithstanding, then remedies for consequential damages are not recoverable.
Procedural violations may also justify remedial attention. Examples of procedural violations in the employment arena include failures to comply with due process obligations or other rules. Although the failure to comply may not always overcome the employee’s violation, for example, the discharge, some arbitrators may award remedies such as compensation between the time of the violation and the arbitration hearing, or between the violation and the removal action, or from the time of management’s procedural violation.
Interest is usually not awarded as a remedy unless express laws or contract provisions provide for it. Federal agencies are more inclined to provide for the payment of interest on an assigned remedy. In many forums, arbitrators do not include interest unless a party has requested it. This is not the case in arenas such as personal injury or auto negligence cases. The growing trend is for parties to specifically request that interest be included with an arbitration award.
Parties sometimes request that litigation costs and attorney fees be awarded as a portion of the remedy. Except in venues where costs and attorney fees are governed by contract or law, costs for the actual litigation or hearing are typically split between the parties unless mutually agreed otherwise.
Interim awards, even if non-monetary, may be granted prior to a final award being issued. Interim awards may be granted to prevent the disclosure of trade secrets or confidential information. They may also be granted to “stop the bleeding” until a final award is issued, such as in the case of a manufacturing part used to build automobiles, even though the arbitration involves patent issues.
Summary
In addressing remedies in arbitration, it is important for arbitrators and advocates to understand the nature of the potential remedies, determine whether the remedies are applicable and justifiable, and whether they are governed by applicable law or contract to protect both the clients’ rights and the arbitration process.
————————
References: Fed. Arb. Act, U.S. Code, Title 9; AAA Arbitration Rules, JAMS Arbitration Rules, Remedies in Arbitration, Hill & Sinicropi.
————————
Earlene Baggett-Hayes is a senior member of Professional Resolution Experts of Michigan (PREMI), a premier group of seasoned invitation-only arbitrators and mediators.
