This blog article is another rant about how to improve arbitration.[i] For more on the subject, read our blog articles “Ways to Make the Construction Dispute Resolution Process More Efficient and Less Expensive” – Part I and Part II.
Fundamentally, I believe arbitrators have to take control of the dispute resolution process. Arbitrators work for the parties, not their lawyers. Irrespective of the lawyers’ desired process, the arbitrators should ultimately participate in and proactively determine the appropriate procedures. For example, arbitrators should decide whether the deposition and discovery process the lawyers suggest is merited, or whether a more expeditious and cost-effective means of discovery should be imposed. The arbitrators should not simply defer to the lawyers, even if the lawyers are in agreement. Instead, the arbitrators should be accountable to the process and the parties. Typically the parties (often business people) want expeditious and cost-effective dispute resolution, not “perfect” proceedings.
This firm recently engaged in an extensive, two-week arbitration. Regrettably, the arbitration proceedings were conducted in a manner more akin to litigation than the alternative dispute resolution process arbitration was designed to be. It was lengthy and expensive, contrary to the desires of the businesses involved in the process, who wanted a fair and expeditious resolution on the merits.
There is a tension between “getting it right” and “getting it done” in commercial arbitration. However, there is also a growing concern about perceived inefficiencies in arbitration experienced by businesses involved in the dispute resolution process. The procedural rules of almost all commercial arbitration institutions permit the parties to modify the procedures and give the arbitrators almost unlimited freedom as to how to conduct the process. If arbitration is to return to its alternative dispute resolution roots, it must again become a creative and cost-effective means of dissolving disputes (i.e. one that is decidedly distinct from litigation).
Some of the ideas to return arbitration to its status as a flexible system responsive to the desires of the users include the following:
- A. Arbitrator Selection
In construction arbitration, the parties generally select decision makers who have knowledge of the industry. The arbitrator(s) and the parties should make effort to conduct the arbitration in an expeditious and cost-effective manner. Arbitrators should actively manage and shape the arbitration process and promote adherence to contractual limits on discovery, time, and tables. Arbitrators should identify and expeditiously act on dispositive motions that might conclude or streamline a dispute, conduct fair but timely hearings, and issue prompt and carefully-crafted awards.
Accordingly, arbitration providers, such as the American Arbitration Association, should take measures to ensure that the parties can find arbitrators with proper case management skills, and a commitment to time and costs savings. Arbitration providers should make information available to the parties on each arbitrator’s effectiveness, and remove arbitrators who prove incapable of efficiently managing commercial arbitrations. Additionally, the parties should be given a mechanism for raising concerns about an arbitrator’s case management.
- B. Discovery Limits
When it comes to expenditures of money and time, no aspect of today’s commercial arbitration is more significant than information exchange (or in lawyer parlance “discovery”). Discovery accounts for the bulk of the cost of arbitration because hearings are often preceded by requests for voluminous document production and depositions. For example, depositions, which were almost unheard of in arbitration 20 years ago, are now threatening to become a normal antecedent to the arbitral dispute resolution process. Similarly, lawyers often insistent on extraordinarily broad discovery, but in reality, these “mining expeditions” require unearthing and sifting through vast amounts of irrelevant information with no certainty that the effort will be justified.
Regrettably, business clients, especially those with significant interests or assets at stake, are likely to go along with the advice of legal counsel. Arbitrators, intent on striking a balance between fairness and efficiency, and fearful about having their awards challenged, may also be reluctant to push back. That said, any honest civil litigator will admit that the return on investment of the discovery process is very small, at least in construction disputes. Generally, very little new information is ever discovered through this process. The mythical “smoking gun” is almost always just that: mythical.
As a result, arbitrators should discourage the use of interrogatories and requests for admissions, or only permit them in limited instances and only upon a showing of good cause. Where depositions are warranted, arbitrators should limit their amount, duration, and scope. Where the parties have failed to agree on such limitations in advance, the arbitrators should exercise their influence to forge such an agreement or impose acceptable limitations themselves.
- C. Time Limits
The parties in arbitration should be encouraged to agree upon time limits for presenting their case at the arbitration. If they cannot agree to limitations in advance, the arbitrators should work to encourage such an agreement. Rather than merely agreeing on a number of days, the parties should agree on the total number of hours each side has to present its case. Each side’s remaining hours should be determined at the end of each day so that the parties can tailor their case prior to the resumption of the hearing the following day.
- D. Written Submission and Hearing Limits
Brevity is the soul of persuasion. Arbitrators should strictly limit the number of submissions and number of pages per submission allowed by the parties. If written submissions are necessary to the resolution of a discovery dispute, the submission should be limited to no more than one or two pages. The party should request a hearing on a discovery motion, if desired, and the hearing should be telephonic. If a hearing would provide little additional new argumentation, arbitrators should advise the parties accordingly, and agree to a hearing only if both parties continue to insist.
- E. Expert Witnesses
In theory, each expert witness is independent of the party who retained him or her and gives the arbitrators his or her unbiased scientific view. Each expert witness has the right to his or her opinion based on the facts of the case and the expert’s special knowledge. However, accepting this as truth requires a willing suspension of disbelief, similar to that required of cinema patrons.
One method of bringing the drama of building experts to reality is the practice of “hot tubbing” (a procedure that is less comfortable for the experts than the name of the practice suggests). In “hot tubbing,” the experts testifying to the same issue are seated side-by-side when giving their testimony. The experts answer each question posed sequentially. Counsel or the arbitrators pose the first question that is answered by the expert for Party A. Following the completion of the expert for Party A’s answer, the expert for Party B answers the same question. The second question posed is first answered by the expert for Party B and is immediately followed by an answer from the expert for Party A. The procedure continues with the same alternations. Reportedly, the “hot tubbing” process causes the different expert’s opinion to become more similar. As a result, the arbitrators see how truly narrow the degree of differences is between experts’ opinions. The procedure serves to highlight essential differences and to minimize hyperbole.
[i] Ideas in this blog are taken from the following sources:
- M. Scott Donahey, Get Back – Return Arbitration to its ADR Roots, Alt High Cost Litig, 32: 117-132 (2014).
- Thomas J. Stipanowich, Soft Law in the Organization and General Conduct of Arbitration Proceedings, Legal Studies Research Paper Series, Paper No. 2014-4 (2014)
- Aaron Foldenauer, Big Risks and Disadvantages of Arbitration versus Litigation, Corporate Counsel (July 29, 2014).