Arbitration agreements are becoming more and more prevalent in litigation, as companies and carriers continue to mandate such provisions in their contracts. Not surprisingly, within these arbitration clauses are some specific and open-ended ground rules regarding the manner in which these may be conducted. For many years, it has been presumed that there will be either a single arbitrator or a panel of three. The time has come for a different consideration for parties standing on the precipice of arbitration — utilizing two arbitrators at the hearing.
Recently, I was selected along with one other colleague to serve on a two-person arbitration panel. As you might expect, my first question to the parties was, “do you want us [the two chosen arbitrators] to select the third person?” The parties responded with a resounding no — they wanted just two arbitrators. My second inclination was to opine internally, “well, how do we break a deadlock if we don’t both agree?” That question was answered, as outlined below, once my co-arbitrator and I began to work together.
Why have two arbitrators instead of three? Here are several benefits to a two-arbitrator panel instead of three:
Before we got to the nitty-gritty of rendering a decision, I questioned how we got to a two-arbitrator hearing. Given the choice between having a panel of three and a pair of arbitrators, you needn’t be an accountant to see that you are saving your client one-third of the potential cost. It is also easier to coordinate with two arbitrators for both scheduling and pre-hearing logistics.
Coupled with the cost savings of having two arbitrators is the time savings. Using only two people means fewer voices to weigh in at the hearing, one less position to have to debate or weigh, and one less schedule to coordinate with for purposes of rendering a final ruling.
While cost savings and time savings may appear obvious benefits to using two arbitrators instead of one, there is a third compelling reason to consider — one of risk management. It would be logical to jump to the conclusion, based upon my logic above, that if saving a client one-third of the cost makes sense, then saving two-thirds by hiring only ONE arbitrator would be an even more prudent economical decision. Yes and no. The deciding factor in choosing between one, two, or three arbitrators comes down to managing risk.
In this post-Covid reality, the legal landscape is filled with some wildly swinging trial verdicts. There have been some surprisingly high “nuclear” verdicts interspersed with some lesser touted but equally devastating (depending on your perspective), zero verdicts.
In addition to the vacillating pendulum swings of these recent trial verdicts, some recent arbitration rulings that have left some participants scratching their head because they were so far out of the realm of the expected “ballpark” that the parties have grown to expect.
Most attorneys do not like to take risks within those extreme “all-or-nothing” margins. Rather, as good stewards of their clients’ cases and their own livelihoods, attorneys like to control as many variables as possible in the litigation process.
Two-arbitrator mediations help minimize such risk. I answered my own question about how two arbitrators might resolve a deadlock as soon as we began deliberating to render a decision. Initially we were not completely on the same page. Without a third voice to break the tie, however, we were forced to debate the issues and reconcile our perspectives in a more nuanced manner. That is not to suggest three-panel arbitrators do not have communications or lively discussions about the issues. They absolutely do.
With only two decision makers, however, we did not have the backstop of someone coming in to agree with one side or the other. So, we subjugated our egos, kept our minds open to opposing discourse and debate, and collaborated to keep one another accountable while carving out a decision that was as exhaustive as it was thoughtful.
In other words, it worked.
The Consensus: A Two-Arbitrator Panel Can Offer Significant Advantages
Not every case will have issues that line up perfectly for a two-arbitrator hearing. While I might not have been a proponent of such a notion a few years ago, I think the time for having the option for two arbitrators has come. There are compelling reasons to have two arbitrators. This choice is one that should be in arsenal for all practicing attorneys looking to minimize risk and a avoid the costs and delays associated with bringing a case to trial.