Does an arbitration clause have to use the word “binding” to be binding? That was the question raised in Akaoma v. Supershuttle Int’l Corp., 2011 U.S. App. LEXIS 12763 (4th Cir. June 22, 2011). The parties arbitrated a dispute under a franchise agreement, and the defendant franchisor succeeded on all but one claim. The federal district court granted the franchisor’s motion to confirm the arbitration award. On appeal to the Fourth Circuit, the franchisee challenged the district court's holding that the arbitration was binding, on the grounds that the arbitration clause in the franchise agreement did not include the word “binding.” The Fourth Circuit affirmed the ruling, noting that federal law favors arbitration and interprets arbitration provisions under normal contract principles. The court held that where the arbitration provision references the rules of the American Arbitration Association, the parties intended that the arbitrator’s decision would be binding.
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