Arbitration that works. Careful selection the key

My last two columns described and illustrated the perils to counsel and clients of not paying sufficient attention to the selection of the best dispute resolution technique and/or forum for their purposes before agreeing to resolve future disputes or even current ones in writing. As I pointed out the most recent and clearest illustration of the risks which accompany too lightly and often too quickly considering these very important decisions was the “Deflategate Case” which after a number of legal and factual twists and turns ultimately was resolved by a divided (2-1) panel of the 2nd Circuit ruling that in effect held that if you, as in this case the NFL Players Association, on behalf of its member New England Quarterback Tom Brady, by contract agree to a dispute resolution technique Binding Arbitration to be administered under Rules authored by the adversarial party The National Football League (NFL) and presided over by an arguably unfair arbitrary and capricious arbitrator, NFL Commissioner Roger Goodell – too bad, so sad! You are stuck with the flawed processes and Neutral which you agreed to as well as the unfair result of your lack of attention to both when it mattered.

There are many organizations which are in the market willing to administer your future arbitration for a fee which usually includes an “Administration Fee” in addition to the actual Arbitrators’ fee. They include AAA, JAMS, ICC, CPR, FINRA and IAA to name a few. In addition, there are numerous individual arbitrators and smaller “Groups” which these larger providers refer to as the “Ad Hoc” market. Some of these charge administrative fees, and some do not. All provide arbitrators and/or mediators at their own individual rates.

Many of the established institutional providers have developed their own rules, procedures and protocols for handling different types of disputes as well as rates adjusted for the size, type and complexity of the dispute. The “Ad Hoc” providers consisting of individuals and small groups loosely associated with each other for the purpose of consolidating their administrative costs usually don’t have their own Rules, but have the ability to administer an arbitration under any Rules agreed upon by the parties and their counsel and can also assist in customizing specific rules and protocols including scheduling, discovery, motions practice, even payment tailored to the particular dispute.

Yet, as I have pointed out, in many cases, little if any thought or time is allocated for investigation by counsel of the comparative ability and resources as well as fees of an organization, individual arbitrator or ad hoc provider to resolve a particular dispute efficiently and economically. As Erika C. Birg, Esquire, a partner in Nelson, Mullins Riley & Scarborough’s Atlanta Office has noted often the “arbitration provision” of a business agreement is “drafted at the last minute, when all that coffee has worn off and the eyelids are starting to droop. The determination of who will referee, let alone judge the dispute is often not considered at all, and the first organization that comes to mind is selected.”

That is quite often a mistake which will haunt the lawyer and the client who dozed off too quickly because there are important issues to consider.

First – is there a good FIT between the organization and/or arbitrator(s) selected and the size, complexity, and subject matter of the dispute. Included in this deliberation should be whether you want one or three arbitrators. Last time I checked three arbitrators cost more than one. How are the arbitrators to be selected by the parties; by the organization, etc? Does the individual and/or organizational provider have subject matter expertise? What are the payment arrangements available? Further can the provider service your parties, witnesses and counsel in the geographic area most convenient to them and are the arbitrator and the provider adequately staffed to provide teleconferencing and/or video-testimony as well as travel if necessary.

Finally, and perhaps most importantly particularly if you are considering one of the larger and established organizations which has its own set of rules – can you and do you want to be bound to those rules? For example, typically international rules require all witness statements and evidence to be submitted in advance of the hearing. As a result there is usually little direct testimony to be given. This contrasts with the commercial Rules of the American Arbitration Association which allows a basic type of “notice pleading” and a streamlined procedure, including a hearing. The AAA also has different rules for construction and employment cases as well as rules allowing “dispositive motions” under certain conditions as well as optional provisions to agree in advance to an “appeal” to a panel of retired judges to review an arbitration award. This can make a significant difference to counsel or a client who wants a streamlined dispute resolution, but at the same time to preserve an economically viable method to challenge an unfair award.

The bottom line is that Arbitration is intended to be a cost effective and efficient process. Notwithstanding the criticism of the process in recent years, the evidence is that if it is managed properly, it still can be and is. The parties and counsel however have to exercise their responsibility to carefully select the provider and the Arbitrator who can most efficiently and economically get the job done.