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When parties reach a post-dispute agreement to arbitrate their claims, this agreement is not a “contract evidencing a transaction involving interstate commerce” such that the Federal Arbitration Act (FAA) would be implicated, according to the United States District Court in California.
In Brayton Purcell LLP v. Recordon & Recordon, No. C-04-4995 EMC, 2006 WL 3093772 (N.D. Cal. Oct. 31, 2006), Brayton Purcell filed suit against Recordon & Recordon (Defendants), alleging copyright infringement, unfair competition, and other claims. During a court-connected settlement conference, the parties agreed to submit their dispute to binding arbitration. Brayton Purcell prevailed at arbitration, and Recordon objected to the award.
At the outset, the Court decided that this was a private arbitration proceeding, not a court-annexed procedure that would implicate local ADR rules. Although the judge in the proceeding was tasked with appointing an arbitrator, that arbitrator was not selected from a list of neutrals, as required by the court-annexed rules. Therefore, the Court concluded that the arbitration was conducted pursuant to a private agreement to arbitrate.
Yet, the FAA did not apply to the dispute because “agreements to go to arbitration that are made after a dispute is alive” differ from “written provisions to arbitrate any potential future dispute,” such that the FAA only controls the latter. Brown v. Hyatt Corp., 128 F.Supp.2d 697 (D. Haw. 2000). Thus, Defendants’ objections to the arbitral award were not time-barred under either the FAA or local court-annexed ADR rules.
Applying both the California Arbitration Act, Cal. Civ. Proc. Code §1286.2, and common law, the Court allowed Defendants to file a formal motion to vacate the arbitration award within one week. Having rejected Defendants’ attempts to invalidate the agreement due to mutual mistake or unconscionability, however, the Court further required Defendants to identify the precise legal bases for objecting to the arbitral award.
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