When to choose arbitration and how to avoid disaster at arbitration
The benefits of private arbitration are legion. When properly managed, arbitration is fast, cost-effective, confidential and may, if desired, permit issues to be adjudicated by individuals with experience in the subject matter. The essential benefits of
arbitration are realized when the lawyers agree in advance to the parameters and rules to be applied by the arbitrator, and the parties select an arbitrator respected for neutrality and fairness.
Although arbitration is an ideal forum for certain cases, others might be better suited to mediation or trial. Attorneys should carefully consider a number of factors when deciding whether or not to arbitrate, as making seemingly insignificant choices early on can greatly affect the outcome of a case and the experience of the parties involved.
If a case seems primed for arbitration, attorneys must also consider other factors that can equally impact the outcome of a case and lead to surprises at the conclusion of the matter. These considerations include selecting the appropriate arbitrator (or arbitrators), preparing and managing the case, presenting evidence and handling the closing arguments.
To avoid disaster, consider the following:
Should you arbitrate this case?
Your first consideration should be whether the case is suitable for arbitration. From my plaintiff perspective, high damage potential accompanied by a plaintiff who does not present well is often better suited for arbitration. Similarly, the passions and prejudices that could be evoked against a corporate defendant in trial will often be ameliorated through the analytical eye of an arbitrator. Cases with highly technical issues are often best presented to an arbitrator.
Consideration should be given to arbitration versus mediation. Where the risk and exposure ranges are high, extreme risk can be avoided and the ultimate loss eliminated through the use of mediation.
Selecting the arbitrator
There can be no doubt that selection of the arbitrator is a critical step in representation of your client in an arbitrated matter. The selection process will depend, in part, on the formality or informality to be utilized at the hearing. Unfortunately, the “dark side” of ADR has produced some arbitrators who “split the baby” in an effort to avoid offending either side. If you have a case where a compromise award is the goal, you should seek out one of those arbitrators. If the case has complex legal or technical issues, it is important to identify an arbitrator who is attentive, thorough and well versed in the substantive law. If plaintiff wants to hit a home run, or the defendant is seeking a defense award, you’d better find an arbitrator that has a history of rendering those awards when the testimony, evidence and law justifies the outcome.
The style of the arbitrator is important as well. Does your case need a strong management hand to rigorously enforce the Rules of Evidence and ensure that the requested timetables are met? Or, do the parties prefer a more laid-back approach? Some arbitrators are able to do both, depending upon the needs of the case. Others utilize a fairly autocratic style that does not change from case to case.
Scope of arbitration
In the absence of specialized circumstances, the jurisdiction of the arbitrator, and the scope of discovery, are determined by the arbitration agreement executed by the parties. In many instances, counsel do not create a formal agreement, or the rules and terms are poorly drawn. It is important to have a clear understanding of the priority of testimony, Rules of Evidence, document exchange, number and identity of witnesses and a realistic estimate of the length of the hearing. When this does not occur, there can be surprise and undue waste of arbitration time. At worse, key evidence such as a medical report prepared after deposition testimony has been concluded, or rebuttal witnesses, could be excluded. I recommend a pre-hearing conference call with the arbitrator if counsel are aware there was no agreement or the agreement is vague.
Preparing your case
Invest in preparation. Anticipate that opposing counsel will ask if your witnesses met with you, and may inquire into the nature of the discussion. Therefore, great care should be taken to not lead the witness, and to ensure that the witness is testifying truthfully. However, you should take your witness through a dry run of anticipated questions and assist your witness in understanding the most effective ways to respond to examination. This is particularly useful with expert witnesses, notwithstanding their egos or the cost. Witnesses should be encouraged to answer concisely, not argue with the examiner and not offer information beyond the scope of the question. There is a marketplace full of lazy unprepared experts who believe arbitration is like having a chat, and that foundation, objectivity and truth are unimportant. Do not hire them. Expert witnesses must leave their egos at the office, and prepare as though this was the trial – because it is.
You are playing on the arbitrator’s theatre, to an audience of one, or three in a tri-partite arbitration. Pay attention to directions, and to comments. Notice whether the arbitrtator is taking notes. If you are spending a lot of time on an issue and the arbitrator is just sitting there, you might need to change your style.
Many arbitrators will subscribe to the rule that all evidence is admissible subject to the weight to be accorded by the arbitrator. You should expect this to be the rule, unless the parties have agreed to a different format in their arbitration agreement. Some arbitrators are particularly annoyed by objections that repeatedly interrupt the testimony. If you have that type of arbitrator, stop objecting! Utilize cross examination just as you would in a trial.
Every case has its problems. You should be the one to identify the problems that exist in your case, in your opening brief, and then deal with them. This reduces the impact of cross-examination or impeachment. Close it cleanly. Prepare a concise closing argument that is focused, well reasoned and as brief as possible. Avoid theatrics. You’re not playing to a jury. By the same token, tell the arbitrator what you want to happen, and why. If you’re the plaintiff, ask for a specific amount of money. If you’re on the defense, be sure to give the arbitrator options depending on potential findings.
Be careful before you submit testimony via declaration or deposition testimony. There is no substitute for live testimony.
After the hearing is over, but before an award is issued, have a plan in place to make one last attempt at settlement. Now that the evidence is in, and has been digested by yourself and hopefully your client, this is your last opportunity to retain power over the outcome.
Request that an arbitrator’s award be supported by detailed findings. This is the only way you or your client will understand what was going through the arbitrator’s mind at the time the award was prepared.
Request that arbitrators issue preliminary findings prior to a final award, or a tentative ruling before closing argument. These preliminary findings will permit the parties an opportunity to address issues that concern them, or to negotiate settlement prior to an ultimate determination by the arbitrator.
Remember, after a Final Award has issued, the arbitrator has lost all jurisdiction with the exception of a couple of statutury exceptions.
After the arbitration
At the end of the day, before attacking the arbitrator, examine whether the key witnesses testified confidently, properly and effectively on the key issues necessary to establish a burden of proof or counter one that has already been established.
If you are a defense attorney and are unhappy with the amount of a plaintiff’s award, examine whether you gave the arbitrator an option. Did you argue only for a defense award? Did you introduce testimony that would support an award different from that presented by plaintiff? If you presented the case for a defense award only, and did not present damage alternatives if your strategy did not succeed, you left the arbitrator with no place to go other than accept the testimony received. Remember, awards must be based on evidence, not argument.
If you are a plaintiff attorney, unhappy with the amount of the award, examine the above factors in reverse.
If you intend to publish negative comments via email pertaining to an arbitrator following an adverse award, publish the award in its entirety. Permit the reader to review the findings tendered in support of the award so that the reader will fully appreciate the basis for the arbitrator’s conclusions. Remember, the arbitrator is muzzled.
By paying attention to the steps outlined above, and remembering to present competent evidence as to each element of a claim or defense, counsel are able to avoid surprises at arbitration. That said, sometimes you will lose, sometimes you will be surprised. Review your case as a neutral might, and perhaps you will better understand the outcome.
Alexander S. Polsky is a member of JAMS where he mediates and arbitrates complex commercial, construction, catastrophic injury, elder case, employment, maritime and malpractice cases nationwide. He serves as a special master and settlement officer in multidistrict litigation. AV rated, Alex has been named by the Daily Journal as one of the Top mediators/arbitrators in California is a Professor of Law at University of California where he teaches a course on mediation and arbitration advocacy.
by the author.
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