Amendment VII (1791) provides that “In all suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved …” This provision guarantees individuals their “day in court” unless they either voluntarily choose an alternative dispute resolution, or the subject matter of their dispute falls under a compulsory arbitration mandate by law. Generally, if arbitration is made compulsory, there is a right of appeal through the courts of an arbitration decision.
Arbitration in the federal courts may be the result of a private contractual agreement to arbitrate, a statutory mandate, or a court-ordered arbitration. A majority of federal courts have authorized or established at least one court-wide ADR program, which may include court-ordered mediation, arbitration, early neutral evaluation (ENE), etc. These measures are the result of the Civil Justice Reform Act of 1990 (CJRA) (28 USC 471 et seq.). The CJRA has changed the use of ADR from being the initiative of individual judges to being part of court-managed, district wide programs.
The Alternative Dispute Resolution Act of 1998 (ADRA) (28 USC 651 et seq.) further expands upon the CJRA by mandating that courts establish and authorize the use of ADR in all civil actions. The federal government also encourages arbitration and mediation within its own ranks. The Administrative Dispute Resolution Act of 1996 provides a mediation forum for handling disputes within agencies or between citizens and agencies (claims against the government).
Arbitration in the federal court system is governed by the Federal Arbitration Act (FAA), first enacted in 1925 and codified in 1947 under Title 9 of the United States Code. Chapter 1 of Title 9 (General Provisions) contains such directives as the method for naming or appointing an arbitrator (Section 5); for summoning witnesses to testify (Section 7); and for remedy and recourse for failing to arbitrate as agreed (Section 4). While the FAA is not in itself a procedural mandate, it provides an authoritative backdrop for arbitrations and commands that arbitration agreements be enforced in accordance with their terms.
Importantly, the FAA “preempts” any state law that conflicts with its pro-arbitration public policy or any state law that renders moot or limits contractual agreements to arbitrate. The rule of preemption applies in both federal and state courts (adjudicating federal claims). However, if the parties clearly express an agreement to conduct their arbitration under state law/rules (under a “choice of law” provision), the FAA will not preempt this.