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Court Upholds AAA Selection Clause, and Forces Investor to Arbitration at the AAA

MAGGIO V. WINDWARD CAPITAL MGMT. CO., No. B134322 (Calif. App., 2Dist., 5/23/00

Agreements requiring arbitration in accordance with AAA rules must take place before the AAA. In the AmEx Window cases, the defense sometimes used as a back-up argument, generally without success, the proposition that, if access to AAA arbitration proceeded through the “Window,” then carried through as well were the SRO arbitration rules (including the six-year eligibility limitation).

After all, the argument goes, the “Window” provision only requires arbitration “before” the AAA, without specifying what rules apply. In this case, the investor agrees in the reverse, agreeing that she must arbitrate “in accordance with the Code of Commercial Arbitration of the American Arbitration Association,” but disagreeing that arbitration must proceed “before” the AAA.

Instead, she filed her claim for mismanagement of her account with ADR Services and petitions the Court to compel arbitration “before” ADR Services. WCM objected, but the trial court concluded: “I think the plain language of the contract talks about using their procedures, but not necessarily their arbitrators.”

On appeal, this Court reverses. The AAA Code adopted in the agreement requires filings to be made “at any office of the AAA.” It requires the AAA to confirm notice of the filings to the parties. It also states: “When parties agree to arbitrate under these rules, …they thereby authorize the AAA to administer the arbitration.”

For these reasons, the Court holds, “an arbitration conducted ‘in accordance with’ the [AAA Commercial Rules] must take place before that body.” Decision: SAC Ref. No. 00-22-002).

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Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article. 

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