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May 22, 2017 Articles

Young Lawyers: The Nuts and Bolts of Arbitration from Preliminary Hearing Through Award and Post-Award Motions

By Kelly Turner

This is the second part of a "Nuts and Bolts of Arbitration" article regarding the arbitration process. This piece picks up after the arbitrator's appointment and follows to the end of the arbitration and post-award motions. By understanding arbitration and the ways it may differ from court-based litigation, counsel and clients can make their arbitration an efficient and economical way of resolving the client's commercial dispute.

The Preliminary Hearing
After the arbitrator is appointed (for this article, we assume a sole arbitrator presides), he or she may convene a preliminary hearing. See Am. Arbitration Ass'n (AAA) Commercial Arbitration Rule R-21 (2013); Int'l Inst. for Conflict Prevention & Resolution (CPR) Rule for Administered Arbitration of Int'l Disputes 9.3 (2014); JAMS Comprehensive Arbitration Rule 16 (2014). While preliminary hearings are within the arbitrator's discretion (note that, under JAMS Rule 16, a party also may request a preliminary hearing), arbitrators usually hold preliminary hearings in all but the smallest and most straightforward commercial cases. The preliminary hearing often takes place telephonically, but it can be held in person if the parties or arbitrator prefers.

The goal of the preliminary hearing is to "establish a procedure for the conduct of the arbitration that is appropriate to achieve a fair, efficient, and economical resolution of the dispute." AAA Rule R-21(b). At the preliminary hearing, the arbitrator, working with counsel, will craft a schedule for the case, including discovery deadlines, motion deadlines (if any), and dates for the evidentiary hearing. AAA Preliminary Hearing Procedure P-2; CPR Rule 9.3; JAMS Rule 16. Importantly, to the extent the arbitration clause requires the hearing to take place within a certain time period, the arbitrator will work to meet the clause's requirements absent the parties' waiving them.

Before the preliminary hearing, counsel should confer on and agree to if possible a case schedule to propose to the arbitrator. Even if the parties cannot agree on all aspects of the schedule, their agreement on some parts will streamline the preliminary hearing. Additionally, the arbitrator will appreciate the parties' attempted collaboration.

The arbitrator will hold the parties to the ultimate scheduling order and, more importantly, the hearing date, absent good cause shown to reset deadlines and postpone the hearing.

Discovery first and foremost will be dictated by the parties' arbitration agreement, should it address what discovery is and is not allowed in the arbitration. Assuming the arbitration provision is silent as to discovery, the arbitrator will decide what, if any, discovery to allow. In considering parties' requests for discovery, the arbitrator will aim to balance the efficiency and speed of the requested discovery and the arbitration as a whole with the parties' ability to develop and present their case. See AAA Rule R-22(a); CPR Rule 11.

The arbitrator has the authority to control discovery, and discovery in arbitration will (or at least should) be more limited than in a court case. In commercial cases, arbitrators generally allow the following types of discovery: (1) focused document requests; (2) limited interrogatories, usually regarding persons with knowledge or damages calculations (but note that some arbitrators may not allow any interrogatories); and (3) limited depositions in larger cases. See AAA Procedure for Large, Complex Commercial Disputes L-3; JAMS Rule 17. If they allow depositions, arbitrators may limit either the number of depositions per party or the total number of hours of deposition per party.

Arbitrators can issue third-party subpoenas. Arbitrator subpoenas for documents or depositions for discovery purposes, however, may not be enforceable in some state or federal courts should the subpoenaed party fail to comply. See Joseph M. Cacace, "Compelling Evidence from Non-Parties in Arbitration," 43 Mass. Law. Wkly., no. 38, May 5, 2015 (reviewing cases); cf. Federal Arbitration Act (FAA), 9 U.S.C. § 7 (allowing for the subpoena of witnesses and documents at the arbitration hearing itself). If enforceability of a discovery subpoena is a concern, an arbitrator could convene a "hearing" solely for the purposes of obtaining the third party's documents or testimony.

Before the evidentiary hearing, parties often must exchange lists of exhibits they intend to use at the hearing and of witnesses they intend to call. See, e.g., AAA Rule R-22(b); JAMS Rule 17(a), (c). This information may be included within discovery or may be part of the parties' prehearing submissions, if allowed. Additionally, should one or both parties retain experts, they usually must disclose the expert and his or her opinion, although full-blown expert reports are not always required.

Motion practice in commercial arbitrations should be more limited than in court proceedings. The types of motions arbitrators are most likely to allow are dispositive motions and discovery motions (i.e., motions to compel).

Some providers' rules specifically allow for dispositive motions. AAA Rule R-33; JAMS Rule 18. Arbitrators may allow dispositive motions if the motions are likely to limit or narrow the issues in the case, even if they won't dispose of the full case. Some arbitrators may require a party to seek leave to file a dispositive motion; if so, often the request for leave can be short and focused, as can the response to the motion for leave. In ruling on a motion for leave to file a dispositive motion, the arbitrator will look at whether the time and money to be spent on briefing and arguing a dispositive motion would be well spent in terms of limiting the scope and length of the evidentiary hearing.

Arbitrators also will hear motions to compel discovery. See, e.g., JAMS Rule 17(c). To keep motions cost-effective, they may allow informal motions to compel (email or letter motions) and may hear telephonic argument on the issues in dispute in lieu of having full briefing on the dispute.

Arbitrators generally will not allow motions in limine, as there is no jury to shield evidence from, and the strict rules of evidence do not apply. AAA Rule R-34(a); CPR Rule 12.2; JAMS Rule 22(d). Accordingly, the arbitrator may allow into evidence hearsay or other types of evidence parties normally might seek to exclude by motion in limine, and will give that evidence the appropriate weight under the circumstances. AAA Rule R-34(b); CPR Rule 12.2; JAMS Rule 22(d). A motion in limine might be allowed if granting the motion could save time and money, for example, barring the in-person testimony of an overseas witness.

Prehearing Submissions
Particularly in more complex cases, the arbitrator may ask the parties to submit prehearing briefs. CPR Rule 12.1; JAMS Rule 20. The parties' prehearing submissions also generally include a list and copies of trial exhibits—joint and individual party's exhibits—and a list of witnesses the party intends to call or may call at the hearing.

The Hearing
The evidentiary hearing—the arbitration trial—usually will be conducted in person. There is flexibility, however, as to how witnesses are presented; they may testify by video or phone, and in some cases all direct examination is presented by written statement. See AAA Rule R-32(c); CPR Rule 12.2; JAMS Rule 22(e), (g). As with the rest of the arbitration, the arbitrator has discretion as to how the hearing will proceed. The arbitrator will exercise his or her discretion with an eye toward balancing (1) treating the parties equally and providing each party a fair opportunity to present its case, with (2) being efficient and expeditious. AAA Rule R-32(a), (b); CPR Rule 9.2; JAMS Rule 22(d).

While arbitrators are ethically bound to maintain the confidentiality of the hearing and the overall arbitration itself, the parties are not so limited absent a confidentiality provision in their arbitration agreement or a confidentiality or protective order entered by the arbitrator.

The Award
Once the parties have submitted all evidence, including post-hearing briefs if desired by the parties and allowed by the arbitrator, the arbitrator will declare the hearing closed. AAA Rule R-39; JAMS Rule 22(h). If the contract does not dictate a deadline for issuing the award, many administering providers' rules provide defaults—under the AAA's and JAMS's rules, the award is due 30 days after the hearing is declared closed. AAA Rule R-45; JAMS Rule 24(a).

The arbitrator will issue a written award, signed by the sole arbitrator or, if a panel, at least a majority of the arbitrators. AAA Rule R-46(a); CPR Rule 15.2; JAMS Rule 24(b). There are generally three types of awards: (1) standard—usually a sentence or two stating which party wins and how much, if anything, it is awarded (AAA's default, AAA Rule R-46(b)); (2) reasoned—a longer narrative providing at least brief reasons for the award (CPR's and JAMS's default, CPR Rule 15.2; JAMS Rule 24(h)); and (3) findings of fact and conclusions of law—a detailed recitation of the arbitrator's factual findings and legal conclusions in support of the award.

Post-Award Motions
One of arbitration's benefits is finality: parties resolve their business disputes efficiently and economically, without appellate review, so they can get back to business. Not surprisingly, then, post-award review options are few.

Before the arbitrator, parties are limited to motions to correct clerical, typographical, calculation, or other similar types of errors in the award. See AAA Rule R-50; CPR Rule 15.6; JAMS Rule 24(j). The arbitrator has no authority to redetermine the merits of the case, so he or she should deny any motion to reconsider the award regardless of how it is framed.

The winning party may file in court (state or federal, if there is federal court jurisdiction) a motion to confirm the arbitration award. If the court grants a motion to confirm, it will enter a judgment in the winning party's favor, which that party then can enforce like any other court judgment.

The losing party may file a motion to vacate the award. Note, however, that the FAA and most states' arbitration acts provide narrow grounds for vacatur. The FAA lists the following bases for vacating an arbitration award:

(1)        where the award was procured by corruption, fraud, or undue means;

(2)        where there was evident partiality or corruption in the arbitrators, or either of them;

(3)        where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4)        where 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(a). Each of these ultimately focuses on the fairness of the arbitration process overall and not whether the arbitrator reached an incorrect conclusion or result in the award. Accordingly, motions to vacate under the FAA are difficult to win unless the process itself was inherently unfair to one party.

Appellate Arbitration
Some administering providers have rules or procedures for an appellate arbitration process that provides for a higher level of review of the underlying arbitration award than judicial review under the FAA or state arbitration statutes. See AAA Optional Appellate Arbitration Rules (2013); CPR Arbitration Appeal Procedure (2015); JAMS Optional Arbitration Appeal Procedure (2003). Because appellate arbitration is still arbitration, all parties must agree to it—either in the parties' original arbitration agreement or in an agreement reached after the dispute arises.

These procedures generally allow for an appellate arbitrator or tribunal of three arbitrators to review the original arbitration award after a tight briefing schedule and to affirm, reverse, or modify the award. The appellate arbitrator cannot, however, remand the arbitration back to the original arbitrator. AAA Optional Appellate Arbitration Rule A-19(a); CPR Arbitration Appeal Procedure Rule 8.2(b); JAMS Optional Arbitration Appeal Procedure (d). In its review of the original award, the appellate arbitrator will apply broader standards of review, similar to that of an appellate-level court. AAA Optional Appellate Arbitration Rule A-10; CPR Arbitration Appeal Procedure Rule 8.2(a); JAMS Optional Arbitration Appeal Procedure (d). The appellate award then becomes the final award for the purposes of motions to confirm or vacate in court.

From the preliminary hearing through the evidentiary hearing, the arbitrator uses his or her discretion to run the arbitration as efficiently as possible while keeping the process fair to the parties. Counsel should be flexible as to how much discovery, motion practice, and witness testimony they need to keep the arbitration efficient and to avoid turning the arbitration into courtroom litigation. Being well versed in the arbitration process, from clause drafting to appellate arbitration, and the applicable rules will allow you to help your client get the most out of arbitration and resolve its commercial disputes efficiently and economically.

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