February 17, 2020 Articles

A Shared Goal: Efficient, Cost-Effective Commercial Arbitration

Arbitrators possess a great deal of power that they can and should exercise to keep costs down and move the process forward expeditiously and fairly.

By Joan Stearns Johnsen

Many select arbitration because of the expectation and belief that arbitration can be more cost effective and more efficient than litigation in court. Equally likely is that most agree that in many instances, arbitration fails to achieve this objective. There are many theories as to why arbitration continues to grow more and more like litigation. The theories offered likely depend upon whom is asked. It may be fair to say that there are differing views on the extent to which the responsibility for keeping costs down and the process moving is controlled by the litigants or by the arbitrator. Your answer to the question may depend on who you ask.

Arbitrators often point the finger at advocates, generally reminding parties that the process is in the first instance designed by the litigants. Arbitrators often attribute the delay and cost to the litigant’s insistence on expansive discovery. Leaving this particular discovery issue for another day, litigants would like their arbitrators to take ownership of their significant power to control expenses and reduce hearing time and hearing delays. Good arbitrators know when they should do more and when they should do less. At the end of the day, this factors into how litigators evaluate their arbitrators.

It is within this context that arbitrators have sought to devise techniques to try to rein in the litigants in the name of maintaining a cost-efficient process while still giving litigants autonomy over their process. However, despite the best of intentions, even some of these arbitrator-initiated techniques are themselves sometimes fraught. Most arbitrators were first litigators. And they should draw on that valuable perspective before adopting procedures with unintended consequences.

The “Meet and Confer” is a popular arbitrator tool. It encourages parties to work together to fashion a process that meets the needs of each case. The rationale is that by the arbitrator ordering the parties to meet and confer, the arbitrator is assisting the parties in taking ownership of their arbitration as well as in avoiding the unwanted outcome of having a less than optimal process imposed on them. The meet and confer is also intended to save the litigants unnecessary time and money arguing their views before the arbitrator. While it makes perfect sense to encourage the litigants to find consensus and to take ownership of their process there is another side to this perspective. In many cases, the meet and confer is a waste or worse. The parties may have diametrically opposed objectives and equally divergent views on what the process should look like. In this case, requiring counsel to “meet and confer” does not make the process more efficient, it adds delay and time with no benefit. An additional disadvantage to the meet and confer to litigants is placing them in the position where they will be required to choose between a wasted effort or ignoring an arbitrator’s order and risk losing credibility by appearing unreasonable and obstinate.

What the litigant may be thinking and unwilling to voice is the wish that the arbitrator would resolve the matter with a decision rather than a mediation. After all, from the perspective of the litigant, that is what the arbitrator has been hired to do. Litigants may bristle at arbitrators who act as facilitators. They appreciate strong arbitrators who exercise their authority decisively and efficiently. Arbitrators are charged with a significant amount of power. Most litigants welcome it when arbitrators are not afraid to use those powers. They are frustrated when arbitrators take the path of least resistance because of fear of vacatur. Arbitrators should not be afraid to ask when they don’t know and once educated, they should make decisions and make them efficiently.

Requesting a “meet and confer” of experts is may be even more problematic and an even greater waste of time and money. The experts often comply with the order although the outcome is foreseeable, which is to achieve nothing more helpful than what was already available to the arbitrator through the expert reports. The arbitrator might consider that the litigants would much prefer it when the arbitrators closely and carefully read all expert reports in advance and identify for themselves the differences in the experts’ opinions.

Along these lines, preparation is key to an arbitrator’s running an efficient process. Arbitrators are paid to be prepared and should be thoroughly familiar with the case. Litigants are often frustrated by arbitrators who they suspect have only a passing familiarity with the complexities of the case possibly from their having done no more than glance through the papers on the plane on their way to the hearing. More preparation by arbitrators means less explanation by litigants. This is an easy and obvious way to save time and money.

Strong arbitrators are not afraid to impose deadlines and then adhere to them. A significant cost to the litigator is extension upon extension upon extension. Again, the rationale may be to preserve the procedural fairness and avoid vacatur, but the good arbitrator will manage a fair process that does not get out of control with extensions. Along these lines, arbitrators do not need to allow each party to file round after round of sur rebuttal briefs. Limit the briefing to what the arbitrator needs and don’t be afraid to cut it off.

Similarly, in the hearing, there is no value to the process of round after round of re-direct and re-cross. A strong arbitrator will not be afraid that they are excluding evidence by limiting re-cross and re-direct. Even in arbitration where the Federal Rules of Evidence (FRE) do not apply, asked and answered is still a very good objection.

A problem with some arbitrators less familiar with arbitration is their adherence to the FRE—which most likely do not apply. Nevertheless, many arbitrators slow down the process by sustaining leading objections to innocuous questions or by rigidly applying the hearsay rule. The arbitrator should exercise good judgment and to keep the hearing moving, refrain from sustaining these sorts of objections when the hearsay is essentially gossip or the leading is testifying by counsel.

An efficient and cost-effective arbitration is a goal that the arbitrator and the litigant share. While the litigant may bear some responsibility for unnecessarily prolonging an arbitration, the arbitrator possesses a great deal of power and can and should exercise that power to keep costs down and move the process forward expeditiously and fairly.

Joan Stearns Johnsen is the current chair of the ABA Section of Dispute Resolution and a professor at University of Florida Levin College of Law in Gainesville, Florida.


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