Selecting Party Arbitrators

Richard Chernick, Esq.

Richard Chernick, Esq.

By Richard Chernick, Esq.

The use of party arbitrators is on the rise in the United States.  It is now common in U.S.-based commercial arbitrations with tripartite panels that the parties each select unilaterally one party arbitrator, who then together select the third.  Party arbitrators can be neutral or non-neutral but must follow standard ethical guidelines for disclosure and conduct.

Why a Party Arbitrator? 

The value of being able to appoint one arbitrator unilaterally is unmistakable.  It allows each side to appoint someone with expertise in the subject matter of the dispute or special knowledge of the industry or the technology involved, or special expertise in an area of the law or even with the arbitration process if that is important.  Industries that continue to use non-neutral arbitrators routinely, such as insurance or maritime, will generally appoint arbitrators based on their industry or subject matter experience and their comfort with the process. 

Neutral or Non-Neutral?

The first issue parties must decide is whether they intend the party arbitrators to be neutral or non-neutral.  Generally, most arbitration rules state that unless there is clearly expressed intent in the arbitration clause, the party arbitrators are to be non-neutral they are presumed to be neutral.  When a party arbitrator is first contacted, it is expected that counsel will discuss with the candidate his or her status; counsel will often consult with the client on this subject and sometimes with the other side.  If there is a consensus, the issue can be determined at that point; if there is disagreement, the practice is for both sides to proceed as if the party arbitrators are neutral until the panel or the arbitral institution is able to resolve the issue.  

Communications with party arbitrators at this stage of the proceedings are conducted ex parte, as allowed by the Code of Ethics, Canon IX.  Parties are free to discuss with the candidate his or her experience, suitability to serve, availability, possible disclosures, fee structure and general knowledge of the subject matter, industry, technology and area of law involved.  They may also discuss the selection of the chair and the names and qualifications of possible candidates for chair.  They may not discuss the substance of the issues in dispute or the candidate’s views about any disputed issue of fact or law.

Disclosure

Party arbitrators, whatever their status, are required to make disclosures to the parties once the appointment has been made.  A party may seek to disqualify a neutral party arbitrator based on these disclosures but may not disqualify a non-neutral party arbitrator.  The disclosures a non-neutral party arbitrator makes are informational only, primarily for the benefit of the chair and the other participants.

To learn more about Party Arbitrators, please read the full article from Law.com by clicking here.

Appealing an Arbitration Award: Early Planning and Agreement Are Key

Kim Taylor, Esq.

Kim Taylor, Esq.

by: Kimberly Taylor, Esq.

One of the fundamental tenets of arbitration is finality.  Parties who choose arbitration over litigation typically want assurance that when an award has been issued, the matter is concluded.  As a result, the Federal Arbitration Act states that arbitration awards can be vacated only under four very specific circumstances:  (1) if the award is “procured by corruption, fraud or undue means”; (2) if the arbitrator exhibits evident partiality; (3) if the arbitrator is guilty of misconduct in refusing to postpone a hearing or refusing to hear material evidence, or engages in other acts that prejudice either party; or (4) if 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” (9 U.S.C. § 10).  Many state statutes are similar.

“Manifest disregard of the law” was long recognized as a means of vacating an arbitration award, if the arbitrator was found to have known of a controlling and well-defined legal principle but failed to follow it when rendering the award.  But that doctrine was called into question in Hall Street Associates, LLC v. Mattel, Inc., in 2008, and several federal courts have held that manifest disregard is no longer a valid basis to vacate an award.  Attempts to expand the scope of judicial review beyond the grounds set forth in the Federal Arbitration Act have generally not been successful, and the Supreme Court (in Hall Street) and other courts have rejected the notion of private parties compelling courts to engage in the arbitration process.  In other words, parties cannot agree to a private arbitration process with the right of a traditional appeal to the court system.

In most cases where parties have submitted a dispute to arbitration, they are content with finality, even if they are at odds with the final outcome.  The certainty afforded by the decision, along with the reduction in time and costs, makes that a sound bargain.  But in some cases where the stakes are high, giving up the right of appellate review can be a daunting proposition for everyone.  Vacating awards under the statutory grounds is rare, and odds are that a final arbitration award will be confirmed by a reviewing court.

With some planning and a carefully worded agreement, parties can realize all the benefits of arbitration (cost and time savings, finality, confidentiality, etc.) while providing for an appellate process.  When drafting such an agreement, consideration should be given to several points, including (1) requiring a reasoned decision by the initial tribunal; (2) defining the issues that can be reviewed on appeal; (3) where the appellate tribunal will be seated; (4) the number and qualifications of the arbitrator(s); (5) the method of appointment of the arbitrators; (6) what constitutes the record on appeal; (7) deadlines; (8) whether there is to be oral argument; and (9) evidentiary standards.

To learn more about arbitration planning, please read the full article from Law.com by clicking here.

Five Things You Didn’t Know about Arbitration

By Chris Poole

Arbitration is by no means a new option for resolving disputes. Yet, parties and their counsel may not be aware of everything that this method of alternative dispute resolution brings to the table. Here are five things you may not know about arbitration from members of the JAMS arbitration panel.

1. A successful arbitration begins with the initial contract

Parties must set the stage for a successful arbitration while they are working on contractual terms and everyone is getting along.

“If you want to have an efficient, speedy and economical arbitration, start talking when the underlying contracts are being negotiated,” says Judge Fern M. Smith (Ret.), a San Francisco-based JAMS arbitrator. “Arbitrators are controlled in great part by the wording of the arbitration clause in the underlying contract between the disputing parties.”

This wording, says Judge Smith, can cover a variety of issues such as choice of law and venue, the amount of discovery and the procedural or administrative rules that will apply to the arbitration.

“Although the arbitration clause may be modified by stipulation, that’s much harder to accomplish once a dispute has dissolved into a demand,” says Judge Smith.

2. You have options

While it’s preferable to have a good arbitration clause set into the initial contract, parties are not without options if they want to make certain changes after a dispute arises.

“Because arbitration is purely a contractual process, parties can change their pre-dispute arbitration agreement after a dispute arises,” says Richard Chernick, Esq., vice president and managing director of the JAMS Arbitration Practice.

Chernick says parties can:

Change the institution that will administer the arbitration

  • Change the number of arbitrators (from 1 to 3 or from 3 to 1)
  • Change the way the arbitrators are appointed (e.g., from strike list to the appointment of a particular person, or from strike list to party appointment of two arbitrators who then appoint the chair)
  • Define the scope of discovery or information exchange
  • Add or delete a fee-shifting provision

3. All evidence is not equal

Judge Richard A. Levie (Ret.), a JAMS arbitrator based in Washington, D.C., says the “I’ll admit it and decide how much weight to give the evidence” approach favored by some lawyers and probably used by many arbitrators can be a disservice to both the parties and the arbitrator.

The reality is that “Arbitrators generally react to quality of evidence, rather than just quantity,” says Judge Levie.

“While lawyers and parties have the right to expect that arbitrators will read and listen to all evidence, counsel should assess carefully which witnesses and documents are most important and necessary to their case,” says Levie. “Identify and focus on that evidence first and foremost. This approach signals to the Arbitrator the importance of such evidence. Do not hesitate to identify secondary evidence, such as authentication evidence or back-up documentation, as secondary evidence and invite the Arbitrator to treat such evidence ‘for the record’ but not essential to determination of the key claims at issue.”

4. Choose Neutrality When Selecting Arbitrators

Selection of the arbitrator may be the single most important consideration in the arbitration process, and it’s best to select someone who is familiar with the law and has a track record of fairness.

“In a three-arbitrator case, avoid selecting as your choice an arbitrator that you believe will be a strong advocate for your case,” says Judge Smith.  “It may seem like a great idea, but often such a person will simply annoy not only the other party-selected arbitrator, but also the Chair, who generally is neutral. The result may well be that your position will be seen only in a dissent.”

5. You have an option to appeal

Perhaps one of the biggest myths about arbitration is that there is no avenue to appeal an arbitrator’s ruling. This is not the case, and hasn’t been for many years. Many ADR providers offer an appeals process and JAMS created its appellate procedures more than 10 years ago. Keep in mind that not every arbitration is well-suited to an appeal, but incorporation of an appellate process can lessen the risks and provide some peace of mind.

Hopefully these five facts have helped clear up any misconceptions or even provided new insights into how arbitration can be used to resolve disputes.

Top Five Myths About Commercial Arbitration

Zela "Zee" G. Claiborne, Esq.

Zela “Zee” G. Claiborne, Esq.

by Zela “Zee” G. Claiborne, Esq.

While the use of arbitration is on the rise, there are some persistent misconceptions about the process that may be deterring some from using this economical alternative to court trials. Here are a few of those myths along with the reality of commercial arbitration practice.

Myth #1: Arbitrators do not follow the law.

Perhaps this myth stems from the fact that the arbitration process is more informal than a court trial. However, the law that will apply to the merits of a case usually is set forth in the arbitration provision of parties’ contract. If not, it is one of the first things to be determined at the preliminary conference with the panel.  Arbitrators are guided by the rules of law specified by the parties.  In some circumstances, if allowed by the parties’ contract and the governing arbitration rules, arbitrators also may be guided by the rules of equity in granting relief.   At the end of a case, a reasoned arbitration award should outline the key issues and the decision of the panel as supported by the evidence and the law.

Myth #2: Arbitrators are reluctant to manage with a firm hand.

Over the last 10 years, one of the strongest trends in arbitration has been to make the process both efficient and fair by encouraging arbitrators to be decisive and managerial in style.  For example, arbitrators may limit motion practice, encourage the parties to split a pre-determined amount of hearing time on a 50/50 basis, limit time for opening statements, limit objections, ask counsel to use written statements in place of direct examination of experts or other witnesses, impose page limits on briefs, and so forth.

Counsel should review the background of potential arbitrators to find those who take a managerial approach to handling cases.  Also, it is common to interview those arbitrators to inquire about their approach to the process.

Myth #3:  Arbitration discovery is insufficient.

Counsel often specify the Federal Rules or state discovery rules in their arbitration agreements in the belief that discovery under most arbitration rules is insufficient.  However, one of the benefits of arbitration is the speedy and efficient resolution of a dispute. Arbitrators are empowered under the rules of most providers to limit discovery in an effort to ensure that it is in proportion to the size of the dispute at hand.

Counsel have a role in this effort and should work with the panel to prepare a reasonable discovery plan, including an exchange of relevant documents and a limited number of depositions.  Interrogatories and requests for admission are not favored in arbitration since they are expensive and often fail to elicit significant information.  Finally, counsel may work with the arbitrators and agree on an informal process for the resolution of discovery disputes, usually handled by just one of the arbitrators.

For the rest of “Top Five Myths About Commercial Arbitration,” please read the full article from Law.com by clicking here.