Are You Savvy About Arbitration?

• Publication year: 2023
• Citation: Vol. 36 No. 2
• Author: Writen by John Burritt McArthur and Lawrence R. Mills

ARE YOU SAVVY ABOUT ARBITRATION?

Writen by John Burritt McArthur and Lawrence R. Mills^*

Using arbitration to resolve disputes has spread rapidly in the last few decades. The underfunding of courts and judicial docket congestion have pushed more cases from court into arbitration. With these cases come lawyers whose main background is in courtroom work. Some of the skills that play well in court do so in arbitration too. But arbitration rules offer lawyers opportunities that court rules of procedure and evidence do not. Proactive planning with the other side and careful attention to how to use arbitration's informality can pay major dividends. Savvy arbitration lawyers know how to navigate arbitration rules and practices. This article discusses how to best do so.

The traditional benefits of arbitration are lower cost, quick resolution, avoiding juries (in cases not well suited to juries), confidentiality, and finality (no or extremely limited appeal). It was once common to discuss arbitration as if these benefits came at the cost of law-based outcomes. As the U.S. Supreme Court suggested in 1953: "Congress has afforded participants ... an opportunity generally to secure prompt, economical and adequate solution of controversies through arbitration if the parties are willing to accept less certainty of legally correct adjustment." (Wilko v. Swann (1953) 346 U.S. 427, 438 [emphasis added].) During the misguided 30-year-long era thereafter, the court even denied arbitrators the right to decide important federal statutory disputes because it did not trust arbitrators' ability to do so accurately. The court has repented of this criticism, and arbitration never warranted it.

In fact, sophisticated parties and smart lawyers know that arbitration, when used properly, often can bring a more fine-tuned justice than court litigation. Arbitration lets parties pick decision-makers with backgrounds best matched to the industry, technologies, and practices involved in a dispute. Parties have more say in the skill, wisdom, and collegiality of arbitrators than of judges. And parties normally have more input and can craft schedules customized to their dispute in a way often not possible in court.

This article discusses how to secure these benefits in six major areas of arbitration: (1) selecting arbitrators; (2) setting the overall schedule, including the hearing date; (3) controlling discovery; (4) pleading and briefing, including pre-hearing briefs; (5) making the hearing work best; and (6) getting the biggest boost from post-hearing briefs.

STAGE 1: SELECTING ARBITRATORS: NO PLACE TO SKIMP ON TIME OR MONEY.

It is hard to overstate the importance of investing time and care in selecting arbitrators. Cases can be won or lost in this first step.

A common arbitration clause lets each side pick one arbitrator, and those two, while still consulting with their appointing

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party, then pick the chair. Lawyers and clients often feel this process has broken down if it takes a few weeks and does not yield an agreed chair. Each major provider has a default process for picking a chair if the parties cannot agree. But smart parties know that spending a few weeks or even a month or two to find the right chair is time, and money, well spent. What impatient parties forget is how much they gain when they find a smart, fair, and neutral chair with knowledge in the area and good management skills. A good chair can shave many months and dollars off an arbitration going forward.

Experienced lawyers sometimes will try to agree on all three arbitrators, thus letting both sides select the entire panel. It is certainly harder to reach agreement on three arbitrators than just one. But if both sides feel their claims are valid and just want good arbitrators to decide a dispute fairly, it should not be that hard to agree jointly on all three arbitrators, particularly when the parties value their ongoing relationship. Such fully consensual panels are the best assurance of neutral, independent decisions.

Parties and counsel who understand decision-making dynamics will not try to appoint partisan arbitrators. A generation or two ago, one style of litigating in arbitration was to pick an arbitrator who would function like another lawyer. Some lawyers thought this was zealous representation. These appointees essentially argued the case to the chair. The chair could not trust such wing arbitrators, so the chair became the sole decision-maker. The parties lost the benefit of having three arbitrators striving for the right answers. Today most arbitrators, even if they are party-appointed, are neutral and independent, as required by the ABA-AAA Code of Ethics for Arbitrators in Commercial Disputes, under which arbitrators must give notice if they read the agreement to require them "not to serve as neutrals." In practice, the non-neutral arbitrator has become an endangered species, sometimes still discussed but almost never seen.

Added characteristics of a good chair. A good panel chair will have the same characteristics of any good arbitrator, as well as other skills. Chairs manage the arbitration. They run the initial pre-hearing conference, normally handle discovery disputes alone and control who writes what parts of the award (assuming the chair is in the majority).

Chairs particularly need effective case management skills. They need to control disruptive counsel and witnesses. They must do so while providing not just the appearance of but genuine fundamental fairness and impartiality. Good chairs are used to stimulating discussion among all arbitrators, even quiet arbitrators, and do not prematurely terminate debate. In contrast, chairs who bully wing-arbitrators may drive the other arbitrators away by announcing the chair's decision and expecting the wing-arbitrators to supinely follow. The proverbial "bad chair" is a former trial judge who never learned to act collegially. Self-centered chairs skew outcomes and make arbitrations less predictable. They should be scrupulously avoided.

One early-stage tip: Negotiate a confidentiality agreement — always. Parties should be thinking about confidentiality and discussing it with their opponents at the same time they are selecting arbitrators. Strong confidentiality is one of arbitration's traditional benefits. Arbitrating parties do not have to battle press requests for public access to the dispute. But many lawyers do not realize that arbitrations are not automatically confidential. And not all arbitration rules bind the parties to treat documents and other evidence as confidential.

AAA Commercial Rule 45(a), for instance, binds only "[t]he AAA and the...