Article A Primer on Arbitration Preparation, 1017 UTBJ, Vol. 30, No. 5. 44

Author:Ralph A. Cantafio, J.

Article A Primer on Arbitration Preparation

Vol. 30 No. 5 Pg. 44

Utah Bar Journal

October, 2017

September, 2017

Ralph A. Cantafio, J.

Arbitration occurs because of numerous circumstances; sometimes arbitration is the result of a contract term requiring arbitration, other times it is by consent. While many attorneys and litigants are familiar with how the arbitration process works in a general fashion, many parties and their lawyers possess only a dim understanding of how arbitration differs from court proceedings. The arbitration process is often further confusing because certain myths exist pertaining to the arbitration process. These myths include the notion that arbitration is typically less expensive or that arbitration can be completed more quickly than litigation. These myths, while sometimes true, complicate a meaningful understanding of the arbitration process.

The objective of this article is to assist lawyers and parties to better understand how the arbitration process works. This article is a very general outline of that process focusing on pre-arbitration hearing matters. It is not meant to address the entirety of all the issues that might arise when a claim is subject to arbitration; instead it is intended to provide background so that participants can better prepare themselves for arbitration, increasing the likelihood of a better result.

Special emphasis in this article at times is focused on arbitration involving the oil and gas industry. However, the general sentiment set forth herein is typically true of most any arbitration. Thus, although this article makes occasional reference to the oil and gas industry, the general insights set forth herein can be applied universally.

This article begins with a brief discussion pertaining to how issues come to be resolved by arbitration. Often there is a term in a controlling contract that mandates arbitration. When arbitration is called for in a contract, as is frequently the case in a commercial context, it is important to review all the salient contracts to understand the underlying terms of arbitration. Like other terms and conditions of any contract, should no one choose to enforce an arbitration provision, that unenforced provision can usually be ignored. Hence, even if a contract calls for arbitration, any party not inclined to move forward with arbitration should discuss with opposing counsel the option of waiving such a provision. Beware, even if there is consent among the parties to waive an arbitration clause, there is possibility that upon the filing of a complaint for breach of contract or other cause of action in a court of competent jurisdiction, a presiding judge, independent of the preferences of the parties or their counsel, can refuse to allow judicial proceedings to move forward judicially. Terminology used in arbitration is also important. The party seeking relief is typically referred to as the claimant. The dispute is called a claim. The relief sought is referred to as a demand.

An initial issue involving the arbitration process involves what rules will be invoked. It is an unfortunate reality that many arbitration provisions as such exist in a contract fail to designate precisely what rules will be used in arbitration. While there are many different sets of rules of arbitration, three commonly utilized sets of rules include those of the American Arbitration Association (AAA), the Judicial Arbitration and Mediation Services (JAMS), and the Arbitration Rules of the London Court of International Arbitration (LCIA). One must be careful when designating AAA rules in a contract because several different sets of arbitration rules are used by the AAA. Common sets of rules relied upon in the positions taken in this article include AAA Commercial Arbitration Rules, JAMS Comprehensive Arbitration Rules and Procedures, and the LCIA.

It is important to become familiar with the specific rules being used in your case. If there is no designation of rules in a contract or even if the parties informally agree to arbitrate, it will be necessary for counsel to come to a resolution involving precisely what rules will be used. If the parties and their counsel cannot agree on what rules to use, a court can involve itself for a limited purpose of designating precisely which rules will be used. Unfortunately, involving a court on a limited basis to designate arbitration rules - or many of the other variables involving arbitration - can be expensive and time-consuming.

Once a set of rules has been designated, these rules will outline exactly what must be set forth as to the substance of the claim, where the arbitration will be conducted, how an arbitrator or arbitrators will be selected, and the extent, if at all, that the rules of civil procedure (particularly involving discovery) and the rules of evidence will be utilized. Where appropriate, it is important to also become familiar with state statutes addressing the arbitration process. These statutes may establish how to proceed where a contract is silent or ambiguous as to how to proceed in cases where arbitration is called for, but insufficient specifics are provided. It is important to be aware of the laws of any given state and, as appropriate, federal statutes as well.

Even those familiar with the arbitration process are well advised to review or even re-review the rules in their entirety upon taking on an arbitration representation. As with any type of adversary proceeding, attention to detail involving deadlines at the inception of a case is paramount to increasing the likelihood of a better result. As with litigation, calendar deadlines make sure there is adequate notice with these periods. Understanding how the rules might affect not only procedure, but substance, is crucial to good representation of a client. For example, there can be significant limitations pertaining to how and when counterclaims can be asserted or amended. There can be significant limitations pertaining to objecting to the selection of a particular arbitrator or the number of arbitrators. Arbitration sometimes gets stereotyped as having fewer or even more lenient rules. While the notion that arbitration tends to be more informal than litigation is generally true, this generality does not mean that there are no enforceable rules involving arbitration. In fact, there are numerous rules. Understanding and applying these rules is critical to a better result.

Selection of the...

To continue reading