Changes to Pennsylvania’s Arbitration Law: What to Expect
Contracts often include arbitration provisions for multiple reasons, such as: to reduce litigation costs, to increase the speed of dispute resolution, and to allow parties the opportunity to choose an experienced arbitrator rather than roll the dice with a judge or jury.
On June 28, 2018, Pennsylvania governor Tom Wolf signed a bill into law that enacts Pennsylvania’s version of the Revised Uniform Arbitration Act (RUAA). The RUAA replaces Pennsylvania’s outdated version of the Uniform Arbitration Act (UAA) and incorporates a number of new and revised provisions, making arbitration more streamlined and efficient. This is an important development in Pennsylvania arbitration law, as the new provisions represent the first substantive update to the UAA since it was originally drafted in 1955.
The RUAA’s provisions will only apply to arbitration agreements signed after the law’s effective date of July 1, 2019; any agreements signed before this date will still be governed by the UAA.
The RUAA contains the following important changes:
- Modification of the RUAA. The UAA is unclear on whether its provisions can be modified by parties. The RUAA, however, expressly allows parties to modify almost every provision of the RUAA through their own agreement. However, certain basic provisions (including those relating to applications for judicial relief, the validity of an arbitration agreement, and disclosure of arbitrator conflicts) cannot be waived or modified by agreement.
- Common Law Arbitration. Under the UAA, an arbitration agreement will be governed by “common law arbitration” unless parties to an arbitration agreement expressly agree otherwise. Common law arbitration is significantly limiting, in that, among other restrictions, it does not provide parties with the right to counsel, does not require arbitrators to make disclosures, and does not give parties the right to present evidence. Under the RUAA, this default to common law arbitration is abolished, and arbitration agreements will be governed by the RUAA unless the parties expressly indicate otherwise.
- Notice. While the UAA does not provide guidance on how an arbitration is initiated, the RUAA states that an arbitration proceeding must be initiated by giving notice in the manner agreed upon by the parties or, in the absence of any agreement, by certified mail or service in the same fashion that would commence a civil action in the courts.
- Arbitrator Conflicts. The RUAA requires an arbitrator to disclose “any known facts that a reasonable person would consider likely to affect the impartiality of the arbitrator” before accepting an appointment, as well as throughout the arbitration. Such facts include the arbitrator’s financial and personal interests in the outcome of the proceeding, and any existing or past relationship with anyone involved in the proceeding. If an arbitrator does not disclose these conflicts, the arbitrator is presumed to act with “evident partiality” and a court may vacate the arbitration award for that reason.
- Discovery. Under the UAA, parties to arbitration cannot conduct depositions of non-parties. However, the RUAA changes this. It allows an arbitrator to permit discovery as the arbitrator deems appropriate. The arbitrator may permit depositions of parties and non-parties, as well as issue subpoenas and protective orders. Additionally, an arbitrator may issue sanctions against a party that refuses to comply with discovery orders, much like a court could.
- Punitive Damages and Attorney Fees. Unlike the UAA, the RUAA allows an arbitrator to award punitive damages if they are justifiable and the arbitrator specifies in the award the bases in fact and law authorizing these damages. Additionally, under the RUAA, an arbitrator can award attorney fees if the parties agreed to the award of such fees. Finally, an arbitrator may impose any other remedies that are “just and appropriate under the circumstances,” even if that remedy would not be granted by a Pennsylvania court under the same circumstances.
- Vacating an Arbitration Award. The RUAA enumerates additional grounds for a court to vacate an arbitration award. These include: when the award was procured by corruption, fraud, or other undue means; where there was corruption by an arbitrator or misconduct by an arbitrator that prejudiced a party’s rights; or where the arbitration was conducted without proper notice so as to prejudice substantially the rights of a party to the arbitration.
Given the prevalence of arbitration provisions in contracts, it is important for you to become familiar with the RUAA’s new provisions, given the significant changes to the way arbitrations will be conducted under future contracts. The lawyers at Cohen Seglias are ready to provide you with the legal advice you need before you sign a contract with arbitration provisions under the new law.