Your First Arbitration: 10 Things You Need to Know - ABA YLD 101 Practice Series

 

By Clinton P. Sanko

Over the years, attitudes have changed toward arbitration. Potential and actual litigants can make a joint decision that arbitration is a better alternative to a court case. Judicial attitudes evolved from an early "distrust of arbitration and discourage[ing] parties from relying on arbitration," to favoring it "as an efficient, inexpensive, and fair method of resolving disputes." 1 As a result of this attitude adjustment, many young trial lawyers have a caseload that includes both litigation and arbitration. This article provides an overview of considerations for the young trial lawyer handling an arbitration dispute.

An arbitration hearing, like a trial, is simply a dispute. These disputes can range from exceedingly complex multi-million dollar cases based on complicated issues of law or fact, to relatively small disputes that have little money at stake, to anything in between. Any arbitration strategy must be commensurate with the type of dispute, and the purposes of arbitration to be efficient and inexpensive. The following list of ten considerations is not exhaustive, but does have importance to a range of disputes. These considerations are generally divided into two sections: (1) what the lawyer should know before going into an arbitration hearing; and (2) what the lawyer should do (or not do) to prepare for an arbitration hearing.

What the Lawyer Should Know Before Going into Hearing

  1. Know Your Client's Goal(s).
    The client likely chose arbitration for a reason and it should be the lawyer's first task to find out why. This conversation will educate the lawyer as to the client's experiences and expectations. Ask the client to define the goal 2; whether the client would like a budget prepared; 3 and what the client believes is the lynchpin issue of the case. Every decision a lawyer makes throughout the course of the arbitration process should be made with the client's goal in mind.
  2. Know the Vacatur and Confirmation Standards.
    A lawyer must not only seek to "win" a favorable arbitration result, but also must seek to obtain an enforceable arbitration award. One federal appellate court recently noted the growing numbers of "poor losers" in arbitration who attempt to attack the enforceability of an arbitration award. 4 The lawyer should not count on the arbitrator - who may not even be a lawyer - to protect the process from legitimate court challenges. The lawyer should review any applicable vacatur and confirmation standards, 5 and ensure that the process is not imbued with unfairness by knowing, understanding, and applying these standards to the arbitration process.
  3. Know the Rules.
    Arbitration is strictly contractual. Arbitration clauses can contain critical rules that are binding on the arbitrator and the parties, and control the overall process. 6 The lawyer should be intimately familiar with the contract clause. Also, the lawyer should know the controlling procedure, which is often outlined in the procedural rules of the arbitration authority. 7 These rules are the guideposts of the process, and the lawyer should know the rules of procedure better than the opposing party.
  4. Know Your Audience.
    In arbitration, the audience is an arbitrator (or a panel of arbitrators). Because the audience is known and knowable, both before selecting an arbitrator and before proceeding with the process, the lawyer should carefully research the arbitrator. By polling colleagues, carefully reviewing the arbitrator's resume and background, and Internet searching, the lawyer can discover valuable information about what the arbitrator(s) is likely to find important. Arbitrators are frequently familiar with the industry and can include both seasoned lawyers and industry experts. The background of your arbitrator(s) will influence how the evidence is presented and how much industry background and education is necessary.
  5. Know the Standards.
    Lawyers are comfortable finding and understanding the legal standards that may govern a case. Industry standards may be equally important. In this area, the client is the lawyer's key to unlocking and understanding these critical standards. The lawyer handling an industry dispute should talk to the client and uncover industry practices and procedures. To an industry-arbitrator who talks the industry language, these industry standards will often be decisive.

1 World Architects and Engineers v. Strat, 474 Mich. 223, 2006 Mich. LEXIS 908, *35 (Mich. May 4, 2006) (Corrigan, J., concurring).
2 The client's goal may not be simply to "win" or obtain a "victory" - a fleeting concept in any litigation. The client may not simply want a monetary award, and could instead be seeking an injunction, preservation of an important client relationship or source of supply, or some other relief that is unique to the questions in the case.
3 Any budget should consider the cost of the arbitration process, remembering that the arbitrator, unlike a judge, gets paid by the parties and often by the hour.
4 B.L. Harbert Inter'l, LLC v. Hercules Steel Comp., 441 F.3d 905, 907, 913-14 (11th Cir. 2006).
5 See, e.g., 9 U.S.C. §§ 9-13 (the vacatur, confirmation, and modification standards and procedure of the Federal Arbitration Act (FAA)). .
6 The clause may define the scope of arbitral disputes, how an arbitrator is selected, the applicable forum, the controlling rules of procedure, where the arbitration can be held, whether the prevailing party can receive attorney's fees, etc.
7 Examples of these rules are the Commercial Arbitration Rules of the American Arbitration Association (AAA), the Code of Arbitration of the National Association of Securities Dealers, or the Construction Industry Arbitration Rules of the AAA.

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About the Author

Mr. Sanko is an associate attorney at Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. in Chattanooga, Tennessee. Mr. Sanko is admitted to practice in Tennessee and Pennsylvania and focuses his practice in the areas of utility regulation and condemnation, and other litigation matters. His experience also includes contract disputes, reinsurance, securities fraud, and arbitration disputes.

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