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In past articles, there has been a repeated emphasis on the need for parties to recognize that arbitration is, in effect, a form of litigation created and controlled by them. In addition to being bound by legislation such as the Federal Arbitration Act (FAA) and the Uniform Arbitration Act or common law arbitration (including legislation relating to it), the parties may adopt and incorporate procedural rules of a national or local dispute resolution provider or craft procedures of their own.

Too often, however, parties forget the binding nature of the rules and procedures they have adopted only to recall and regret them at a later time. Such a situation arose last month in a case decided in the 7th U.S. Circuit Court of Appeals, Webster v. A.T. Kearney Inc.

Webster involved an age discrimination claim by an employee in which the employment contract required arbitration of any dispute regarding employment. The terms of the employment agreement further provided that the arbitration would be conducted pursuant to American Arbitration Association (AAA) procedures.

The arbitrator ruled in favor of the employer. The AAA sent the arbitration decision to the parties on Jan. 4, 2006, by both regular and e-mail. The employee’s attorney received and opened the e-mail on Jan. 5 and received the regular mail on Jan. 9. On April 3, 2006, the employee’s attorney filed a motion to vacate the arbitration award and served the employer with notice of the motion on April 5, 2006. The employer moved to dismiss the motion as untimely served.

This case was subject to the FAA, which provides that notice of a motion to vacate or modify an arbitration award must be served upon the opposing party or his attorney within three months after the award is filed or delivered.

The court, therefore, was required to decide the date on which the award was delivered by the AAA for the purpose of determining when the three months within which the motion had to be served had commenced.

The employer’s position was that the award was delivered when it was placed in the mailbox and e-mailed on Jan. 4, so that service of the motion on April 5 was beyond the permissible three-month period.

The employee’s attorney contended, however, that the three-month period only began to run when he received the arbitration award in the mail on Jan. 9, or, at the very earliest, when he opened his e-mail on Jan. 5.

A preliminary argument by the employee that the filing of the motion to vacate on April 3, itself satisfied the time requirement was rejected by the 7th Circuit in light of the FAA language, quoted above, which indicates that what is required is service of the motion to vacate within three months.

As noted above, however, the critical issue for the court to determine was when the award was first delivered by the AAA for the purpose of determining when the three months started to run? The 7th Circuit expressed surprise that surprisingly few decisions had directly addressed what it meant for an award to be delivered. But it determined that it need not expend any effort on statutory interpretation or judicial construction because the parties had agreed to proceed under the rules of the AAA, which did, in fact, supply the definition of “delivered.”

The court noted that the parties were proceeding under the September 2005 AAA Rules for the Resolution of Employment Disputes. Under these rules, the parties were deemed to have consented to service by mail of all papers, notices, or process relating to the arbitration. More significantly, the rules provided that the parties shall accept as legal delivery of the award the placing of the award or a true copy of the award in the mail.

Based on the AAA definition of delivery as the placement of the award in the mail, the court determined that the award was “delivered” on Jan. 4, when it was placed in the mail by the AAA case manager, so that the subsequent service of the motion to vacate on April 5 was at least one day too late and did not satisfy the three-month FAA requirement.

The court did take note of two other federal appeals court cases that had concluded that the award was delivered when it was actually received, and not when it was mailed. Those cases were distinguished, however, because there was nothing in those cases to reflect that the parties had agreed to another definition of delivery such as that set forth in the AAA rules.

The 7th Circuit acknowledged that this interpretation of delivery may not be intuitive, (or, in the words of another federal appeals court quoted in Webster, interpreting “delivery” as “mailing” would “hopelessly twist the ordinary meaning of the word

delivered”), but as it is the definition set forth in the AAA rules, which were adopted by the parties, there was no reason to provide an interpretation that conflicted with that agreed-upon definition. The court reaffirmed that under the FAA, parties to an arbitration are free to agree to any governing rules, and the courts will enforce whatever system they choose. Accordingly, it dismissed the motion to vacate as untimely.

But what about the other argument of the employee relating to the date that the e-mail had been sent to the employee, Jan. 4? Could that also serve as the date on which the award might be deemed to have been delivered? This question was, of course, rendered moot by the earlier decision that the delivery of the ordinary mail occurred upon its deposit with the postal service on Jan. 3. Nonetheless, the court addressed other interesting issues raised by the employee with respect to e-mail service by way of dicta.

For example, the employee argued that e-mail could never constitute proper delivery of an award, unless the parties explicitly consented to this form of notification. The court agreed that although the AAA rules did provide that the parties may consent to notice through electronic means, consent to such is not implied. Nonetheless, the court reflected skepticism about this argument because the record reveals that a great deal of communication between the parties and the AAA was accomplished through e-mail.

In particular, it noted that a number of scheduling orders had been disseminated to the parties only through e-mail. On this basis, therefore, the court appeared to recognize that it might have found that there was explicit consent to the use of e-mail for delivery. Nonetheless, the court specifically declined to make such a decision in the absence of an express agreement, and decided to leave that decision for another day because the issue had already been resolved through its decision with respect to the mailing of the arbitration award.

One other argument was proposed by the employee: the e-mail may have been sent out to the attorney on Jan. 4, but was not opened and read by him until Jan. 5. Accordingly, Jan. 5 should be the date from which the run date would begin. The court rejected this argument stating that if e-mail was, in fact, to be considered a proper form of notice under the agreement, its delivery under the AAA agreement should be deemed to have occurred when it was sent on Jan. 4, just as postal mail is deemed to have been delivered when it is placed in the mailbox.

Moreover, the court pointed out that should the time only begin to run from the date when the e-mail was opened, a party could postpone the tolling of the period indefinitely by ignoring correspondence. As it is clear that a party cannot avoid service by simply not opening his regular mail, so too, he may not avoid the consequences of such an award by simply refusing to open his e-mail.

Two particularly instructive points seem to have emerged from this opinion:
• If you are proceeding under the rules of a particular dispute resolution provider, you should familiarize yourself with all of its rules so that you do not run afoul of its requirements and end up prejudicing your case by failing to comply with them.
• If the parties begin to use a form of notification and communication such as e-mail, as they did in Webster, a court may — although they did not reach the question here — decide that the parties have impliedly accepted that form as satisfying the formal requirements of service called for by the arbitration. If a party does not wish that such an inference be drawn, it may be advisable to so state up front in the agreement or in each subsequent communication employing that means.

Abraham J. Gafni is a mediator/arbitrator with ADR Options, and a professor at Villanova University School of Law.

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