Overview of Nevada Rules of Arbitration

An Introduction to Arbitration in Nevada

Arbitration, under the Nevada Uniform Arbitration Act, is a form of alternate dispute resolution that allows parties to resolve conflicts before a neutral arbitrator rather than in the court system. Arbitration is commonly used to settle disputes in various industries including employment, real estate, construction, and more. Individuals can agree to arbitration at any time, either by contract before a dispute arises, or after the dispute begins, but in Nevada, parties are actually required by law to attempt to arbitrate many cases that are filed in court.
Once a case is ordered to arbitration , the parties will select an arbitrator or panel of arbitrators who will listen to the facts in the matter and render a decision. The decision is known as an award, and contains the arbitrator’s findings on the law and facts as applied to the case. The arbitrator may also award damages as appropriate. The courts of Nevada have limited ability to intervene in the arbitration process, and are diCourt necouraged in the law to limit the extent of their involvement.
An interesting difference between arbitration and litigation, is the actual amount of time a case takes from start to finish. In the Nevada court system a typical civil case takes about 18.2 months. A case that has been ordered to arbitration typically takes about 129 days.

The Statutory Framework for Arbitration in Nevada

To appreciate the significance of arbitration in Nevada, it is important to understand the legal framework that governs the process. The most important sources of law are the Federal Arbitration Act, the Nevada Revised Statutes, and the Nevada Supreme Court. The Federal Arbitration Act ("FAA") promotes and protects private dispute resolution agreements between parties, and embodies a national policy favoring arbitration and an amicable resolution to disputes. The scope of the FAA is limited to contracts in "interstate commerce" (typically those that cross state lines). The FAA controls in a dispute where both parties are engaged in interstate commerce and there is a written arbitration agreement. The FAA governs the enforcement of agreements to arbitrate, the effects of agreements to arbitrate, enjoining litigation where there is an agreement to arbitrate, the consolidation of arbitrations, challenges to arbitration awards, and vacatur of arbitration awards. The Erie Doctrine does not permit the application of the FAA to in-state transactions, and the FAA specifically states that it does not preempt state laws that regulate the validity of arbitration agreements or provide defenses to the enforcement of arbitration agreements.
Domestic arbitration in Nevada is governed by the Nevada Revised Statutes 38.213 through 38.247 (the "Nevada Arbitration Act"). The Nevada Arbitration Act covers domestic transaction disputes that are arbitrated in Nevada. While the Nevada Undersheriff’s Office mandates that Nevada Rules of Civil Procedure apply in labor arbitration cases, the courts do not require the application of any specific procedure so long as fundamental fairness is observed and the parties’ due process rights are satisfied. Nevada law allows for arbitration agreements that are independent of the Uniform Arbitration Act.
Nevada Revised Statute Chapter 38 applies to all agreements to arbitrate entered into after October 1, 1961, unless the parties choose a different forum. Under the Nevada Arbitration Act, a commercial "friendship clause" that specifies the arbitrators will be chosen from a specific source such as trade associations or other specified groups is void. NRS 38.215(1). Similarly, labor relations contractual provisions requiring the selection of an arbitrator cannot dictate choice of source for the arbitrator. However, subject matter restrictions on the types of disputes that can be arbitrated are allowed.
There are several clauses contained in the Nevada Uniform Arbitration Act that are not included in the FAA, but are available in Nevada by adopting the Nevada Uniform Arbitration Act. These clauses include qualifications to serve as an arbitrator, disclosure duties of the arbitrator, powers of the arbitrator, immunity of the arbitrator, waiver of the right to a jury trial, waiver of punitive damages, confidentiality requirements, authority to make rules and guidelines, and the availability of penalties. In addition, the Nevada Uniform Arbitration Act provides grounds for mandatory arbitration provisions, grounds for pre-arbitration litigation, and methods for selecting arbitrators. The Nevada Uniform Arbitration Act also expressly permits class action waivers in arbitration agreements and prohibits the availability of class actions in arbitrations on labor issues and claims.
The Nevada Arbitration Act maintains a balance between the FAA and the state law in the manner in which the parties intend the arbitration to be conducted. If a dispute arises under a transaction that is governed by the FAA, federal court jurisdiction claims will control, reserving the case within the federal district courts. However, if the dispute is considered a domestic arbitration under the FAA, then the Nevada Uniform Arbitration Act will apply.
A first rule of arbitration in Nevada is that in order for the statute to apply, the law requires that the contract must be created in the state of Nevada. A second rule is that the parties can refer to the terms of arbitration in a separate document other than the contract; however, the document must be expressly referenced in the contract. Lastly, the law contains the requirement of an in-writing arbitration provision where arbitration is required.

Arbitration Procedures Under Nevada Law

Arbitration is generally a three-part procedure: 1) the initiation of arbitration through the submission of a claimant’s demand and the scheduling of an initial hearing; 2) the hearing, in which arbitrators evaluate the evidence, make determinations of fact and apply relevant law to the issue(s); and 3) the issuance of an award, which concludes the process.
Pursuant to NRS 38.221, parties to arbitration must generally agree to submit to arbitration. If a party does not abide by an arbitration agreement or otherwise communicates opposition to arbitration, the court may compel arbitration or intervene. Parties typically select an arbitrator, or a panel of arbitrators, to conduct the arbitration. Neva. Code. Civ. Proc. § 38.226(3) provides that parties may jointly elect an arbitrator. If parties cannot agree to appoint an arbitrator, each party to an arbitration selects an arbitrator, and those two arbitrators select a third arbitrator. Parties can issue subpoenas to compel attendance at an arbitration proceeding and the production of documents or books. NRS 38.226(4). The arbitrator(s) hears the evidence, determines what law applies to the facts, and can award a money judgment or other relief.
Nevada law requires that arbitrations have the same rights to subpoenas and the like that are provided under the Nevada Rules of Civil Procedure. NRS 38.226(4). Thus, in the same way that courts can formally compel a party to attend a hearing or produce certain evidence, parties to an arbitration can also compel witnesses or the production of evidence to the arbitration proceeding.

The Benefits of Arbitrating in Nevada

Opting for arbitration when considering a business dispute may be advantageous. In many instances, arbitration will bring you an outcome faster and at a much cheaper cost to either party. Also, the arbitrator will decide the issues without any involvement of the justice system. The use of an arbitrator will not clutter the court system.
There are a number of advantages to using arbitration in Nevada. Below are a few reasons as to why you may want to consider arbitration: Fast resolution. Arbitration can take a matter from hearing to result in a matter of a few months. This is due to the fact that there are not any of the usual court proceedings. Instead of waiting on judges and juries, the matter can be resolved without the need to go to court.
Arbitration can save you money. Both parties save by skipping the cost of formal court procedures. A case brought to court can be expensive and time consuming. Traditional court procedures are required in a traditional court system. When a matter is arbitrated, it is usually done at a lower cost to the parties. Parties do not have to go through the expense of trial preparation which includes discovery. Also, the parties get to finalize a matter faster than they would in court. This saves both parties a lot of money.
Privacy concerns. Arbitration proceedings are easily to keep private. If privacy is a requirement that you desire, then arbitration is the way to go. Courts have restrictions that require all proceedings to be available to the public unless specifically limited by statute. Statutes by the State of Nevada allow for a number of types of cases to be confidential. If the matters involved are sensitive and you do not want any personal information exposed to the public, then arbitration may be just what you need.
Another advantage to an arbitrated proceeding is that it is not adversarial in its nature. Unlike court proceedings, arbitrated matters are usually handled in a less aggressive manner. While a case cannot be brought and no subpoenas are allowed in arbitration, parties can put on their case through testimony. Parties do not have to present testimony in front of anyone that is foreign to them. This helps in dealing with the emotions once the proceeding has ended.

Arbitration: Pros and Cons

Despite their many benefits, arbitration proceedings may not be a desirable choice for all parties in a Nevada arbitration. Potential challenges to arbitration clauses in these proceedings include concerns about the potential for bias or partiality of arbitrators, arbitrator egregious behavior, and the limited grounds for appeal provided under Nevada law. The Nevada Supreme Court has held that the fundamental fairness requirement of the right to due process prohibits a biased neutral decision-maker. The potential for bias is further compounded within arbitrations because arbitrators are not subject to the same ethical guidelines that bind judges. For example, unlike judges, arbitrators are not required to recuse themselves if they have a financial stake in the outcome . Given the lack of oversight of arbitrators, particular focus should be paid to arbitrator selection in an arbitration proceeding. It is important to note that arbitration awards are given great deference by the courts and are much less susceptible to appeal. The parties must rely on the limited grounds for challenging an arbitrator award under NRS 38.241(1). Specifically, these grounds are that the arbitrator: (a) If this limited basis for appeal is narrowed further through contract, a dissatisfied party is usually left with only one option: participation in the arbitration and then an appeal of any adverse result. This lack of appeal process is one reason that the parties may choose to request a civil jury trial rather than entering into an arbitration proceeding.

Pragmatic Approaches to Arbitration Practice

Choosing the right arbitrator is key to success. Just like with a judge, the arbitration sitting in the decision maker’s chair can have a profound impact on the outcome of your case. A less than impartial arbitrator can lead to a costly and unjust outcome. Do your research before committing. Look at the arbitrator’s past history, and learn all you can about them. Seek information from counsel who has appeared before them. Always seek to understand the arbitrator’s tendencies before selecting them. It is also possible to learn about the arbitrator’s tendencies by reading past opinions, if available, or decisions from other arbitrations they’ve handled. Reviewing the AAA (American Arbitration Association) reports can provide you with information about the arbitrator. The AAA provides a free search of its arbitrators. Type in the name of the arbitrator you are considering. From there, you will receive their qualifications, as well as a list of the arbitrations they have been involved in. Take the time to see which decisions were published, as this can provide insight into the types of cases and issues the arbitrator typically rules on. You also should contact the AAA to obtain the arbitrator’s complete record. This will provide the ruling in each arbitration, the attorney fees and expenses awarded, an explanation of the arbitration fees paid by each party, and a rating system from the parties involved. The Arbitration Association code of ethics provides detail about the expectations of an arbitrator. Typically, the arbitrator is not paid until he or she enters an opinion which is published by the Association. This is meant as an incentive for the arbitrator to complete the decision in a reasonable amount of time. If they fail to do so, this is considered a breach of their fiduciary duty. An important tip you should keep in mind is the importance of preparation. Take the time to prepare all of your documents for the case well in advance. Stay as organized as possible. If at all possible, meet with your counsel beforehand, and review the case thoroughly. Understand the facts of the case. Try to establish what’s important, and what isn’t, in terms of the evidence you have. Arm yourself with the information you need to ask the right questions, and make sure you know the evidence you need to prove your case. Effective preparation is essential to winning. Be thorough, and use your time wisely.

Evolving Trends in Nevada Arbitration

The most recent published decision affecting the Nevada Rules of Arbitration was filed on May 18, 2017, in which the Nevada Supreme Court considered the effect of a party’s failure to pay arbitration fees. Meyer v. Woody, 133 Nev. Adv. Op. 41 (2017). The case involved a dispute in which one party filed an initial demand for arbitration seeking $1,750,000.00 in damages. Following appointment of an arbitrator, however, and after a prehearing conference, the claimant failed to pay the second half of the arbitrator’s fees as required by the arbitration rules. Before the hearing could be held, the claimant withdrew the claim, but the arbitrator went forward with a hearing against the claimants on a motion to strike the demand for arbitration and for breach of contract. The claimant failed to attend and the arbitrator granted the motion and directed claimant to pay $75,000.00 in attorney’s fees and $15,160.12 in costs to the opposing party. The Nevada Supreme Court held that these $90,000+ costs, fees and expenses were unreasonable under the circumstances and reduced the award to $5,000.00.
Businesses should be aware that the Nevada Legislature has also enacted two new bills that may have an impact on the manner in which arbitrations are pursued in Nevada. The first, AB 275, signed by Governor Sandoval on June 9, allows an attorney appearing before an arbitration panel to examine witnesses and present evidence by telephone when an arbitrator or party will be located outside the jurisdiction of the arbitration hearing. The second, SB 492, signed by Governor Sandoval on June 9, provides that a memorandum or order entered by an arbitrator constitutes a final judgment or order for all purposes under the Nevada Rules of Civil Procedure.
The U.S. Supreme Court also issued a decision which has potential impact on Nevada arbitrations. In Kindred Nursing Centers Limited Partnership v. Clark, 137 S.Ct. 1421 (U.S. 2017), the Court took the position that "clear and unmistakable" language was not required to grant an arbitrator the authority to decide issues of arbitrability, but that such issues must be "arising out of" what is determined to be arbitrable according to the parties’ contract.

Conclusion: What’s in Store for Arbitration in Nevada

The trend towards the incorporation of arbitration as a means for alternative dispute resolution will continue in Nevada due to the value it brings to litigants both within and outside of the state. In particular, the rationales for instituting arbitration include the following:

Reduced cost: Private arbitration is typically more efficient than a court proceeding, and with significant cost savings on attorney’s fees and other litigation costs, many parties will increasingly choose arbitration over a court proceeding.
Efficient and expedient resolution: Cases arbitrated before a professional private arbitrator with specialized knowledge of the subject matter typically are completed much faster than the two-plus years that most court cases last. Litigants and trial lawyers instinctively will prefer the quicker resolution afforded by arbitration.
Less complicated process: Arbitrations normally involve fewer deadlines and a streamlined process geared towards efficiency. For example, only one pre-hearing brief is allowed, which must put all of your known arguments forward; pleadings are concluded at the time the pleading parties submit their opening briefs, as opposed to court pleadings where you can add new arguments throughout the process.
Choice of referees: The rules in Nevada make it very clear that the parties have the right to select a private arbitrator. Clarke County offers an arbitration commissioner as a judge-of-the-day to help settle cases; otherwise , all arbitrators have to be mutually agreed upon by the parties.
Robust coverage of the Uniform Arbitration Act: Nevada has adopted the Uniform Arbitration Act and has a series of jurisprudential opinions, state and federal, guiding it that parties can rely upon to ensure that the process is properly facilitated and respected both within and outside the state. As the Federal Arbitration Act provides a uniform procedural framework for the enforcement of arbitration contracts, the interplay between the Nevada and federal statutes provides a wealth of jurisprudential authority in favor of and supporting enforcement of arbitration agreements.
Deference to the contractual language selecting arbitration as the sole remedy: Nevada courts habitually defer to the contractual language solely selecting arbitration as the exclusive remedy for certain types of disputes. Banks and lenders typically draft these types of contractual provisions, e.g., what may be engaged to "fixed right to foreclose through foreclosure fees." Nevada courts will honor the parties’ rights under the contract selected exclusive arbitration as the only remedy.
Predictability/finality: Parties will choose to arbitrate because it provides more certainty and finality to the process.

These advantages, combined with economic realities, including lower litigation costs in Nevada, mean that more companies will choose to arbitrate in Nevada rather than litigate. Nevada will therefore remain competitive with the many domestic and international arbitration venues easily accessible to litigants.