Copyright © Joyce F. Glucksman, P.C. All right reserved.
ARBITRATION BEST PRACTICES
Many litigators and their clients approach arbitration as if it were a trial in court. However in doing so they fail to take advantage of the benefits of arbitration. The major benefits of arbitration are that it is faster and less expensive than a trial in court with its various levels of appeals. Additionally, the parties (or their lawyers) have more control in selecting an arbitrator(s) than they do in being assigned to a judge or having an unfavorable jury pool from which to strike a jury. In some cases, if a party has been involved in drafting the arbitration agreement or portion of a contract requiring arbitration, there is control over the procedures used in the arbitration. What follows are tips for having a successful arbitration.
Know Your Arbitrator
It helps to have an early in-depth understanding of your case because the whole process of arbitration is shorter than litigation. Discovery is started immediately and is often limited. In choosing your arbitrator, look for expertise, training and temperament especially if your client’s business or issue is technical and it is important for the arbitrator(s) to understand the details of what the business or client does.
Counsel should consider whether they want a former Judge who may run the arbitration more like a trial and adhere to the rules of evidence more strictly. Some retired judges had such busy calendars that they may not have developed the patience typically seen in arbitrators. On the other hand, retired judges may be more comfortable allowing greater discovery. Do you want a former Appellate Judge whose rulings you can read to get a feel for how he or she may rule in your case? Many former judges came from District or State’s Attorneys offices, U.S. Attorney’s offices or large defense firms and may be conservative with a defense bias. Some Plaintiff’s lawyers also took defense cases but received more publicity from a plaintiff’s verdict and are perceived as having a plaintiff’s bias. If they have handled only criminal cases, they might not be suited to a complex civil case. A family court judge may not be well qualified to arbitrate a complex commercial construction case. You might want a former Administrative Judge whose hearing procedures were similar to those used in most arbitrations (especially if he or she had been a Merit Systems Protection Board or Equal Employment Opportunity Commission Administrative Judge). A practicing attorney may be most current with the law and may be more lenient with discovery. An academic may be more open to new arguments or a case in which fairness plays a big part.
You should also consider whether you want a younger or more mature arbitrator, one who is in demand, who may be hard to schedule or one who has more convenient dates. Whether the arbitrator is an entrepreneur or has always worked for someone else may also be a consideration. Does your case rely on equities or would you rather someone who is more rule oriented? When you know your case’s strengths and weaknesses and have a good understanding of how your client’s testimony and witnesses’ testimony will be perceived you will be better able to select an arbitrator who will be receptive to your case.
If your case is a technical one you may want someone with experience in the industry who is likely to produce a decision that makes sense to the industry. For example, you might want someone familiar with chemistry to handle an arbitration concerning the quality of chemical manufacturing. However, be aware of partisan biased arbitrators as it may affect how “legitimate” the award and/or the program is viewed. For example, where employees are required to arbitrate employment disputes, if all the possible arbitrators are management officials or former management officials, rank and file employees may not accept arbitration decisions as fair and neutral. If your argument is mostly legal or procedural you probably want a lawyer for the arbitrator or, at least, the chair of a three person panel. These considerations are just that, considerations and generalizations. Counsel should always look at the individual arbitrators presented before making a selection of someone to hear their case.
Prior to selecting an arbitrator(s) some jurisdictions and rules allow counsel to talk to the potential arbitrator(s). Either both counsel do this together to avoid the appearance of collusion or improper influence or counsel may jointly submit general questions concerning suitability and availability, but not about the specific fact pattern or the merits of the case, to prospective arbitrators. There should never be ex parte communication with an arbitrator. Ask the potential arbitrator(s) who the lawyers were in their last few cases and talk to them or request the arbitration service provider give each side the names and addresses of representatives in some of the prior cases the arbitrator(s) has decided. Talk to colleagues who may have used the arbitrator.
Additionally, do your research. The internet puts many tools at your disposal. Make a general internet searches looking at websites, Facebook, LinkedIn, Twitter, Instagram, blogs, Westlaw, Lexis, BNA, American Arbitration Association (hereinafter “AAA”) awards publically available – through Lexis or Westlaw and Financial Industry Regulatory Authority (hereinafter “FINRA”) arbitration awards publically available online at no cost. Read any journal articles the prospective arbitrator may have written. If the arbitrator has been a labor arbitrator there are resources for their decisions as well.
Know The Rules
An advocate should always review the rules which will control the arbitration. Large providers such as AAA, FINRA, JAMS and FMCS have their own rules. These may include separate rules for employment cases, commercial cases, construction cases and securities cases that will state the procedures the parties must follow including limitations on discovery procedures. Individual contracts may specify which set of rules govern or may set forth their own rules as in some employer promulgated mandatory employment agreements, executive contracts and commercial contracts of all types. The contracts may also specify whether the rules in existence at the time the contract was made or the rules in existence at the time the arbitration demand is filed will control.
The rules may specify which state’s law applies and what damages are available. Many credit card and consumer agreements such as cell phone agreements have rules which specify the location where the arbitration must take place and prohibit class actions, effectively making it cost prohibitive to challenge a bill or term in the agreement. If the claim is based on a specific statute such as a discrimination claim, any damages available in a court proceeding must be available in an arbitration. For common law claims such as breach of contract, the damages available may be limited to those specified in the contract.Since one of the benefits/burdens of arbitrations is that the parties drafting arbitration provisions can agree on issues, procedures and outcomes that wouldn’t be possible in litigation, an advocate must read the applicable arbitration provision and rules carefully. Things to consider in drafting arbitration rules to be put into any contract such as an executive employment agreement or a contract to build and lease an office building include:
If you plan to use an expert witness, be aware that some rules and arbitrators require exchange of expert reports in as soon as twenty one (21) days after the scheduling conference. If the parties or one of them have drafted the rules, they should consider including a rule stating that the expert’s report shall be considered as the expert’s direct testimony and allow only cross examination and brief rebuttal testimony at the hearing. This will help expedite the hearing.
The rules or agreement will also determine the type of award rendered by the arbitrator(s). It may be Summary Award e.g. I find Respondent discriminated against Claimant and award her $X in back pay and $Y in compensatory damages plus $Z in attorney’s fees. It could be a Standard or Brief Award which would include a decision on each issue. For example, “I find that Plaintiff has failed to show that Defendant’s actions proximately caused her injuries. I further find that Plaintiff was traveling at an excessive rate of speed and failed to stop at a red light proximately causing Defendant’s injuries. Plaintiff shall pay to Defendant $1,000,000 in compensatory damages and $250,000 in punitive damages.” The parties may also ask for a Reasoned Award which is a more detailed award including the factual and legal basis for the award. If the parties request it, some arbitrators will do findings of fact and conclusions of law. This is often the case where the parties have an ongoing relationship and wish to use the Award for some precedential value. Most rules require an award to be issued within thirty (30) days of the close of the hearing.
Most arbitrators will hold a prehearing and scheduling conference to set deadlines, schedule discovery or other prehearing conferences, and the hearing itself. It is a good practice to have the parties themselves present so that they can be aware of the time limits and be responsive to their attorneys within the time allotted which will keep the arbitration process moving forward. If the parties are present, they can check their calendars before the hearing date is set thereby avoiding conflicts with the scheduled date. The parties can also give potential witnesses the date of the hearing so that the witnesses can plan their schedules. Additionally, having the parties present at the prehearing conference has a tendency to reduce the number of continuances attorneys request and achieve one of arbitration’s goals; being faster than litigation in court.
It is the arbitrator’s job to see that there is sufficient discovery for a fair hearing and a just result but still limit discovery to achieve the goal of a faster and more economical process. Thus, the parties may be limited in the number and types of discovery tools which are available to be used. While some arbitrators believe and some rules specify that written interrogatories or requests for admissions are rarely if ever necessary or appropriate, others allow all types of discovery.
At the first pre-hearing and scheduling conference the parties and arbitrator should be prepared to discuss the scope and types of discovery to be used. This includes documents presumed to be relevant and exchanged immediately such as personnel files in an employment case or medical files in a medical malpractice or personal injury case. The number of depositions, if any, should also be set. Time limits for depositions may also be set. Parties should be aware that many arbitrators will hold the parties to the deadlines set at this first prehearing conference and will not allow broad fishing expeditions for information. Requests should be relevant and more narrowly tailored to the specific case than what is typically used for a case in court. For example, while in may be proper in Court to request information which is “directly or indirectly related to decision to remove the patient’s gall bladder,” a more appropriate request for an arbitration is “Provide any document which was used in making the decision to remove the gall bladder.”
Electronically Stored Information (“ESI”) is becoming more and more important but some arbitrators, especially non-lawyers and lawyers who haven’t been actively practicing law in an area that uses ESI, don’t understand it. You don’t want to pay for the arbitrator(s) to go through a massive amount of potential evidence in camera or get up to speed on ESI issues. To avoid this advocates should make it easy as possible for the arbitrators by working out issues with opposing counsel in advance. If the issue is complicated suggest appointment of a special master for ESI issues. If there is more than one lawyer for a party, designate an ESI Liaison. .
Arbitrators have broad authority to hear and decide motions including arbitribility, (whether an issue is subject to the arbitration clause,) motions to compel and dispositive motions subject to the agreement mandating the arbitration or the rules controlling it. It is best if you advise the arbitrator and opposing counsel that you plan on filing a motion as soon as possible. Choose your motions purposefully and file only those which are likely to produce a more efficient and economical proceeding. Some of the most common motions are:
Discovery Motions: Judges dislike them, so do arbitrators. If discovery is narrowly tailored to get only the information that is actually needed there should be no reason to file a Motion to Compel. Unfortunately, Motions to Compel seem to be filed in most cases. The parties should make a genuine good faith effort to resolve discovery issues before filing this motion. If you have a three person panel, the Chair of the panel usually decides discovery motions unless the parties or rules dictate otherwise.
Dispositive Motions: The applicable rules will determine if dispositive motions are allowed at all. They are usually discouraged but may be within the arbitrator’s discretion if it is likely to dispose of the case or narrow the issues. Some rules require a party to first submit a short letter brief explaining why they are likely to be successful on the merits of the motion to dismiss. These motions however, are rarely granted because one of the limited grounds for vacating an arbitration award is refusing to hear evidence which is relevant and material to the controversy. Arbitrators tend to take virtually all evidence which is not cumulative or repetitive “for what it is worth.”
Motions in limine are unnecessary in arbitration and may be counterproductive. To decide the motion, the arbitrator must have a good idea of what the evidence is that the party thinks is more prejudical than probative and then put it out of his or her mind. As with dispositive motions, an arbitrator must be cautious in excluding evidence.
Motion for Continuance: If both parties agree it is usually granted. If only one party requests a continuance it is discretionary with the arbitrator. The parties should keep in mind that one of the benefits of arbitration is that it is faster than court and continuances draw out the proceeding. Refusal to grant a continuance for good cause may also result in decision being vacated bu a court.
Preparation for Hearing
Your preparation for hearing should be similar to preparing for any bench trial. Pre-mark your exhibits and prepare your exhibit books. Exchange a list of witnesses and documents you intend to introduce. If you and the other side can agree on joint exhibits, the same exhibit doesn’t have to appear in Claimant and Respondent’s exhibit book. Put stipulations of fact in writing. Since arbitrators do not do research, if you rely on any case law or statutes you must provide a copy of any case or law to the arbitrator(s) and highlight the parts you believe are relevant..
In preparing your exhibits remember most arbitrations are held in conference rooms. It is overkill to have large poster boards of rules, deposition testimony or contract provisions. Use an overhead projector or computer. Coordinate with the arbitration provider and/or opposing counsel how many people you expect to have in the room at the same time including attorneys, paralegals, computer/technology experts, witnesses, court reporters, etc. to make sure the room in which the arbitration is to take place is large enough to accommodate everyone comfortably. Arbitrations are stressful enough without having to be on top of each other.
Each side should be prepared to have enough witnesses available for each day of hearing so that there will be no need to recess early. If necessary, be prepared to call a witness out of turn. If you are having a witness testify by video conference, Skype or telephone, make sure you have the proper equipment and it works before the hearing.
While the strict rules of evidence do not apply in an arbitration, arbitrators are loath to exclude evidence since it might violate due process or be a grounds for vacating the decision. If your arbitrators are lawyers, especially if they have had trial experience, they are more likely to stick closer to the rules of evidence. Introduce anything that may be helpful. The arbitrator(s) will give it the weight it deserves. While leading questions and narratives are allowed, let the witness testify as much as possible to enhance credibility. You can however, summarize the points the witness made. E.g. “So what you are saying Ms. Witness is…”
The most useful objections are based on relevance, materiality and cumulative. If appropriate, explain why a piece of evidence is unreliable. Challenge something that is unauthenticated. If you get overnight transcripts offer that to the arbitrator(s) as well.
If you are using an expert witness make sure the expert is an expert. You may not need to meet the Daubert standard in an arbitration but you should expect your expert to have good credentials in a field the arbitrator(s) would not be expected to know. It is important to know when not to use an expert as well. If you don’t have your expert’s reports used as their direct testimony, if possible, have the expert present during the examination of opposing expert. Sometimes it is possible to agree for the experts to meet or speak and prepare a list of points on which they agree and which they don’t agree.
Finality of Award
Arbitration awards are generally final and can be confirmed by a court within one year of the award being issued. They then become enforceable as judgments of the court. In contrast, the grounds for overturning an award are very narrow. Under the Federal Arbitration Act, they include: (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in one or more of the arbitrators, (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
While finality is one of the benefits of arbitration both the American Arbitration Association and JAMS have, in recent years formulated optional appeals procedures. Both entities have a more lenient standard of review than that provided under the Federal Arbitration Act. State Arbitration Acts may also have other grounds for vacating arbitration awards.
In conclusion, there are many benefits of arbitration but one must be aware of them and utilize the process to achieve the goals of a cheaper and more expedited resolution of disputes.