Written By: Ashley L. Belleau, Esq.
New Orleans, Louisiana
In this world of spiraling litigation budgets and crowded courts, parties and their counsel are in search of a quicker, more economical and more effective way to resolve disputes. Alternative dispute resolution can provide a faster, easier, and less expensive alternative to court litigation. This article will focus on some practical tips to manage the efficient and cost-effective arbitration. It will include specific tips and techniques to increase the efficiency, minimize expense, and assure a quick resolution at each step of the arbitration proceeding.
1. Drafting the Arbitration Clause
The first step in the arbitration process takes place long before arbitration is considered. It is the drafting of the arbitration clause to be contained in the contract. The drafter should consider the type of matter and the business industry when tailoring the arbitration clause. Also, it is important to determine the “best” forum – whether it’s AAA, JAMS, private arbitration or a local arbitration group - and the best venue for the arbitration to take place.
The parties’ contract to arbitration is generally embodied in an arbitration clause in a more comprehensive contract. The arbitration clause should include the basis for, scope and procedure of arbitration. Also, costs considerations should be thought of at the outset when drafting the arbitration clause. For example, a single-person panel is less expensive than a three-person panel. It is important to identify the number of arbitrators, whether one or three arbitrators will determine the dispute that arises within the arbitration context. Three arbitrators will increase the cost of the arbitration, and scheduling becomes more difficult with three arbitrators. The benefit of a three person panel is that there is the opportunity to have panelists with different areas of expertise. For example in the securities industry, the three-person panel generally includes at least one attorney and one industry person. However, if the claim is “small” it may not merit the need or costs of three arbitrators. The drafter of the arbitration clause should consider including a term that if a claim is less than $100,000 there will only be one arbitrator.
Also, the parties should consider whether discovery should be limited in the arbitration process. Further, limiting discovery can prevent costs from spiraling out of control. In drafting the arbitration clause, the limitation of discovery term can be inserted. Examples include:
■ No depositions
■ Limit the number of depositions per side
■ Limit the hours of depositions per side
■ Limit the number of interrogatories and requests for the production of documents
■ Set a time frame for discovery to be completed
■ Limit the number of experts per side
Further, the arbitration clause should include the type of arbitration award to be rendered; written reasons or decision only. Awards that contain written reasons may open the door for one party to challenge the award on the basis the panel failed to follow the law. Awards that only contain the ruling are less likely to be challenged.
2. Selecting the “Right” Arbitrator for the Matter
It is imperative to conduct due diligence on the list of potential arbitrators in order to determine their background, their experience, and their tendencies in handling arbitrations. The first place to start is to conduct internet/social media investigation via LinkedIn, Google, AVVO, and other types of social media websites. Depending on the forum, publically rendered awards may be accessible. For example, certain FINRA arbitration awards are accessible. A review of such awards can provide the parties an insight on the experience the arbitrator has and whether the arbitrator has any leanings toward the claimant or respondent in a particular type of dispute.
In some forums counsel is permitted to actually interview the potential arbitrators. Such interviews can be helpful; however, the potential arbitrator may present himself or herself in a different light in order to obtain the appointment.
It is also important to investigate the reputation, knowledge, experience and effectiveness of the potential arbitrator. One way of conducting such an investigation is by contacting counsel who has had arbitrations with the proposed arbitrator. Contact with counsel can illuminate whether the potential arbitrator has knowledge about the law and insight into the rules of the forum. Further, counsel can provide information as to whether the arbitrator allows the attorneys to present the case but does not allow the attorneys too much “rope” to have full blown discovery. In other words, does the potential arbitrator have the ability to control the tempo of the arbitration and the parties?
3. Immediately Investigate the Facts of the Matter
It is important to investigate the facts of the arbitration as soon as you are engaged to represent the party. By investigating the facts of the matter immediately you can determine the claims to be asserted or the potential defenses to be asserted. Further, it is important to gather the documents that support your client’s position early in order to avoid documentation being lost or misplaced. By immediately investigating the facts of the matter upon engagement, you can determine the necessary discovery within the confines of the arbitration clause that controls and/or the forum rules that govern. By investigating the facts early and gathering the documents necessary to either assert the claim or defend the claim, the theme can be developed with the case early in the process. Also, by immediately investigating the facts of the matter, you can identify the potential witnesses and obtain any statements, if necessary, in the event a witness is moving out of the region or jurisdiction or could possibly be ill and not available in the future.
In tandem with immediately investigating the facts of the matter, counsel should determine early on the evidence that will be needed to prove the claims or to refute the claims via defenses. In arbitration, counsel should not ask for everything regardless of the necessity in the discovery phase because it is not cost-effective and can delay the arbitration process. Accordingly, counsel needs to be prepared at the outset to determine what is necessary to prove the claim and what is necessary to prove the defenses. In determining what is necessary in the discovery phase, counsel should consult with in-house counsel or the client to tailor the necessary discovery requests. The client will be appreciative of being involved in the process and knowing that you are attempting to maintain the cost-effective discovery process, which benefits the client.
5. Preparing for the Arbitration
In preparing for the arbitration, it is important that counsel be flexible. The abilities to “think outside the box” and leverage technology are essential. Consider video conferencing witnesses as an alternative to live testimony. At the outset of the claim being asserted, counsel should ask the client or in-house counsel what the objective is – is it to posture the case for early settlement or to obtain an award after hearing. Often times the client or in-house counsel wants to posture the case for early settlement due to the amount of the alleged damages involved.
Once you know what the ultimate objective is, either to win at all costs or to put the case in posture for settlement, then counsel can evaluate how best to streamline the preparation process without losing the benefits of the preparation period. For example, the parties can agree that no more than two depositions on each side will be taken. Also, the parties can agree to limit discovery in other ways, include exchanging of all documents, electronically stored and tangible that a disclosing party has in its possession or control and will use to support the claims of defenses in the matter. This duty to disclose would be similar to Rule 26 of the Federal Rules of Civil Procedure.
It is also important in preparing for the arbitration that counsel stick to the theme which should have been established early in the process. The theme of the case should be simple and easily understood; every part of the claim or defense and should circle back to that theme. Further, the witnesses and the documentary evidence that is chosen should be chosen to support the theme of the case.
Finally, it is important, during the preparation phase, for counsel to reaffirm with the client or in-house counsel the ultimate objective: whether to win or to put the case in the posture for settlement.
6. The Arbitration Hearing
Once the arbitration hearing starts, it is important to avoid unnecessary repetition in order to keep the process streamlined. Stick to your theme! Avoid the formalities of a courtroom. This is arbitration – not the courtroom. The beauty of arbitration is that you don’t have to be “Perry Mason” to be effective.
Stay focused on the your client’s goal and what your client wants to achieve at the hearing. Again, stick to your theme and make common sense arguments in the arbitration hearing.
7. Miscellaneous Techniques
Counsel should work with the client to determine the best scheduling for the hearing. Further, counsel should identify whether there is a need for an expert. If so, the expert should be vetted and a determination should be made which expert to hire. It is important to determine the best scheduling for the hearing for the expert if the case is dependent on expert testimony.
8. Other Costs Considerations
Other costs considerations include the retention agreement of outside counsel. Fee arrangements can include a flat fee with milestone for exceptional results; an hourly fee; or a blended rate with a bonus at the end if the defined objective is achieved. Using a flat fee arrangement allows a client to know the costs up-front, whereas an hourly fee allows a client to pay for the services as they are rendered, which may be spread over time. A blended rate with a bonus as the end allows a client to pay less than the hourly rate and to spread the payments over time as services are rendered and gives counsel the added incentive to achieve the defined objective so he can earn the bonus at the end.
Another cost consideration is to mediate the dispute early on to attempt to achieve an early resolution, which in turn will reduce the costs if an early resolution is achieved. The benefit to mediation is that it allows the client to attempt to resolve the dispute on the client’s terms, if possible before binding arbitration. Mediation is a non-binding process that allows the parties on both sides to craft a mutually agreeable resolution rather than have an arbitrator or an arbitration panel make a binding determination. Additionally, mediation solutions can be crafted to address the dispute in creative ways in contrast to arbitration where there is a determination that one side wins and one side loses. Of course, if a mutually agreeable resolution is achieved, then the settlement is binding once an agreement is signed.
In conclusion, in our world of spiraling litigation budgets and crowded courts, clients and in-house counsel are demanding a faster, more economical and effective way to resolve disputes. By maximizing the above benefits that are built into arbitration, arbitration can be easier, faster and a less expensive alternative to court litigation. Following the afore-referenced tips and techniques will increase the efficiency, minimize expense and ensure a quick resolution at each step of the arbitration proceeding.
Ashley L. Belleau recently served as the 83rd President of the Federal Bar Association and is a Partner in the New Orleans office of Montgomery Barnett, L.L.P. Her main areas of practice include alternative dispute resolution, business law and commercial litigation, construction, fidelity and surety law, and professional malpractice. She recently was selected for inclusion in the 2011 Inaugural Edition of the Martindale-Hubble® Bar Register of Preeminent Women Lawyers™, an honor reserved exclusively for less than five percent (5%) of women lawyers who are rated AV® Preeminent™.