Why Trial Lawyers Should Love Arbitration
By John Arrastia Jr. – June 14, 2011
Some attorneys complain that they do not like arbitration, but as trial lawyers, we should love arbitration. Arbitration provides trial lawyers with the best opportunity to really experience trying cases to a decision. The following is an explanation of why trial lawyers should embrace arbitration in appropriate cases and suggestions on how to maximize the appeal of arbitration to those of us who enjoy trial work.
When Trial Lawyers Should Give Up the Courtroom
We have all come to learn that each case may take years before the dispute may ever come to trial before a court. But think back for a moment. In law school, most aspiring trial lawyers dreamed of arguing cases before packed courtrooms. Upon graduation, we looked forward to our first day at the firm, expecting to fashion insightful arguments that would win the day for our clients. Of course, none of us expected the seemingly endless mounds of discovery, repeated discovery disputes, and the three years it would take to get to trial.
Arbitration provides us—as trial lawyers representing clients in business-related disputes—with a solution where we can focus on actual trial work without the years of pretrial. Even a complex case can oftentimes be arbitrated in less than a year, from initiation to final award, and many cases takes far less time. The focus of the arbitration is not discovery or pretrial but rather the actual presentation of evidence and argument at a final hearing. In this streamlined process, our skills as trial lawyers are at a premium.
Four Overlooked Advantages of Arbitration
We rarely hear about four important characteristics of arbitration that should appeal to most trial lawyers. First, you will have a greater likelihood of actually arguing the case. As a percentage, more arbitrations go to final hearing than litigated cases go to trial simply because arbitration is designed to go to final hearing. As an advocate, you will have a better chance of arguing a dispute in arbitration than in trial.
Additionally, many clients prefer arbitration because it should be quicker and far less expensive and does not require as much participation in discovery and pretrial as with courtroom litigation. One thing that business clients have a hard time understanding is why a $100,000 dispute can seem as complicated and expensive as a $1,000,000 dispute. Of course, the reason is because the rules of procedure and evidence apply equally to all cases above a certain dollar threshold, irrespective of complexity. In arbitration, however, we can tailor the proceedings to the size of the dispute so that discovery is commensurate to the size of the dispute. This concept, and the resulting efficiencies of time and money, seems to appeal to non-lawyer clients.
Arbitration also levels the playing field so that the difference between the proverbial David and Goliath is minimized. In arbitration, it is more difficult for one party to wear down an opponent through discovery, excessive motion practice, “papering” the case, or making the process too expensive. This is a benefit for not only a plaintiff making a claim against a deep-pocket defendant but also for a defendant who does not want to be forced into an unfair settlement by economics just because the plaintiff is making the litigation too expensive to continue.
There should be fewer venue-related and jurisidictional disputes in arbitration than in litigation. If the arbitration clause calls for a hearing in San Diego, then that is the venue. Forum non conviens, lack of personal jurisdiction, and other similar issues do not arise with the same frequency because, to a great extent, the jurisdiction and venue of arbitration is a function of the parties’ arbitration agreement.
What Is Arbitration?
It is helpful to recognize that arbitration is a true alternative to litigation. It is neither a substitute to litigation nor is it “litigation lite.” For example, litigation is designed to be a process that narrows the facts and issues in almost any dispute over time until a trial is held on the remaining contested issues while the parties refine their claims and defenses. The process is one to resolve disputes, which may or may not result in a trial. Litigation has certain safeguards to protect litigants, including extensive discovery, rules of procedure and evidence, and trial by jury. These safeguards are employed step-by-step as the case proceeds from pleading, to motion to dismiss, to summary judgment, through discovery, and then at trial. Measured by amount of effort expended, generally the pretrial portion of litigation greatly exceeds the actual trial time.
In contrast, arbitration focuses on parties that have generally had prior business dealings with an emphasis not on pretrial, but on the presentation of evidence and argument at a final hearing. The safeguards in arbitration are not designed for fairness in pleading, dispositive motions, and extensive discovery because those are rarely employed mechanisms. Instead, arbitration is designed to allow the participants to have a “day in court,” presenting their positions at one time, irrespective of sophistication and maneuvering, in one place with a level playing field.
A huge distinction between arbitration and litigation is the availability of a jury. The arbitration panel, consisting of one or more arbitrators, serves as the trier of fact and the trier of law. It is up to each trial lawyer to determine whether, in a business dispute, this is an advantage or a disadvantage and then to weigh the resulting benefits.
The Benefits of Arbitration
If we learn how to take advantage of the benefits of arbitration by using the process as intended, most trial lawyers will find that it is an effective resource and it will become far more enjoyable. Arbitration is designed to be a simpler, quicker, and less-expensive means to resolve disputes. This includes less discovery, pretrial motion practice, and formality. Seemingly, most complaints about arbitration arise when attorneys try to interject litigation into arbitration and end up with a combination that generally incorporates the worst aspects of each. Arbitration is far more effective if parties utilize the process as designed, i.e., as an alternative to litigation with an eye toward fully presenting a case at the final hearing. If used properly, arbitration should live up to its billing as a form of effective dispute resolution with benefits to the parties and their trial lawyers.
Arbitration as a Creature of Contract
Arbitration only arises from the agreement of the parties, either by contract or through stipulation. In the majority of the cases, arbitration is a contractually required dispute resolution mechanism. Thus, most arbitration results from commercial or consumer transactions even though there are important exceptions.
When first evaluating a dispute, determine whether there is a clause that requires arbitration. This clause typically states the rules that are to be used, the organization that will administer the arbitration, the venue, and any specific agreements relating to the arbitration. For example, the clause may simply state that disputes will be arbitrated according the Commercial Rules of the American Arbitration Association (AAA), administered by the AAA, and with hearing to take place in Atlanta, Georgia.
Arbitration clauses can also have non-standard provisions. Some clauses state that the jurisdiction’s rules of evidence will apply or that punitive damages are not available. Other clauses require three arbitrators or one. Irrespective of what the clause actually provides, it is the guidepost governing the arbitration.
Counsel often forgets, however, that the arbitration agreement, like any contract, may be modified by a subsequent agreement. For example, the parties may agree to modify a venue provision for their convenience. In other instances, the parties may agree to limit or expand discovery to suit the dispute or authorize the arbitrator to decide and award attorney fees. Generally, arbitrations are receptive to any changes to arbitration provisions if the parties so stipulate and they comport with common sense.
Governing Rules of Arbitration
Once the applicable rules are identified, the next step is to research the governing rules. Of the most popular forums, the AAA rules can be located at www.adr.org, and the rules for JAMS (formerly the Judicial Arbitration and Mediation Services, Inc.) can be found at www.jamsadr.com. Just a brief review of the rules will instantly alert you that they are broader, easier to understand, and briefer than any set of civil procedure rules. While the rules of procedure cover most issues that arise, along with thousands of appellate decisions interpreting those rules, the rules of arbitration lay out simple procedures and broad guidelines to direct the parties.
Many lawyers ignore the rules, which take only a few minutes to read, and instead start to apply the rules of civil procedure. Perhaps that results from a belief that civil procedure is the best way to proceed, or perhaps it is the comfort of relying on a procedure and process with which we are so familiar. This often results in wasted time and effort because those litigation rules often do not apply in arbitration. For example, document requests in litigation have evolved into highly formalized and structured affairs that can be quite costly, with arguments over the meaning of single commonly used words. In arbitration, document requests are typically made by a simple letter or email, with the expectation that a basic request will be honored by the opposing party. Read the applicable arbitration rules and save yourself time and effort by employing those rules. Again, remember that arbitration is an alternative to litigation and not a different version of it.
Advocates should also familiarize themselves with the applicable state arbitration code and the Federal Arbitration Act (FAA). If the dispute touches on interstate commerce, then the FAA trumps any inconsistent provisions of state law by virtue of the Supremacy Clause of the U.S. Constitution. Generally though, state and federal law is limited to the procedure and process of compelling arbitration and either confirming or vacating the ensuing award. The actual procedure for conducting the arbitration is left for the rules of the administering organization.
Goals of Arbitration
Upon reading the rules or even proceeding in arbitration, most lawyers are struck by the absence of formality, discovery requirements, and prehearing practice. The reason is fundamental to the process. The focus of arbitration is on conducting a final hearing where each party presents its full proofs. This includes the presentation of all witness testimony, documents, and argument. While it is not unheard of, arbitration is generally not designed for resolution prior to the hearing, such as with a motion to dismiss or summary judgment. There are several reasons for this. First, the arbitration’s equivalent of the complaint, called a demand, does not require the formality of a pleading and is only designed to provide fair notice of the complaining party’s claim. Second, discovery is generally limited so that it is difficult for a party to sustain the prehearing burden of proving that it should prevail as a matter of law. Third, parties are expecting to present their proofs at the hearing and not before, so the process is geared to that final conclusive hearing.
Arbitration generally arises from parties with a preexisting relationship. Because arbitration can only arise from an agreement to arbitrate, the parties typically engage in some sort of business relationship before the dispute. In contrast to a victim who was blindsided by a truck, for example, most parties of the arbitration have a fair grasp of the parties’ relationship and the facts underpinning the dispute. Because the arbitration typically only encompasses contracting parties and their agents and affiliates, the disputes can be very focused and directed to the parties’ direct interactions. As a result, arbitration does not typically require third-party discovery, extensive discovery into potential witnesses, and other pretrial mechanisms designed to unearth those facts that are already known by contracting parties.
Choosing an Arbitrator
As trial lawyers, we want to know and understand the judge and the trier of fact. In litigation, our judge may be assigned and our jury pool is randomly selected. Arbitration allows us to at least substantively participate in the selection of the “judge” and “jury.” This means that we have the opportunity to select an arbitrator that is suited for the particular case, which has significant benefits.
Arbitrators are ethically bound to disclose relationships with the parties, their counsel, and witnesses and identify potential conflicts of interest. The advantage of choosing an arbitrator is not an unscrupulous or unfair benefit to one side or the other. But the advantage is one of expertise, special skill, and general attitudes towards the process. For example, a construction dispute may be arbitrated more quickly and efficiently if the arbitrator is an attorney and a general contractor, because the arbitrator does not need to be informed of details about the industry and standard practices. Similarly, a smaller dispute or one that needs to be resolved quickly may proceed with less time and expense if you choose an arbitrator that takes a less-expansive view of discovery in arbitration.
We, as trial lawyers, spend a great amount of effort in addressing the variables in our cases. For example, trial lawyers have to accept the fact witnesses available, but we choose our experts carefully. We must accept the facts of the case, but we evaluate and craft our theories and presentation. The arbitrator is a variable in the case, so you should spend time researching and selecting an arbitrator.
Again, most of the issues in arbitration can be modified by that parties’ agreement, and the selection of the arbitrator is no different. An arbitration clause may call for a panel of three arbitrators, but a panel is more expensive than one arbitrator and generally takes more time because of the need for three arbitrators to caucus before rendering decisions. What if the dispute is relatively small? The parties can agree to proceed with one arbitrator. Similarly, the parties can mutually agree to choose a specific arbitrator.
Some attorneys complain that they do not like arbitration because of the possibility that a “rogue” arbitrator will render a capricious decision. This fear presumes that arbitrators are likely to abandon fairness and common sense once they assume a mantle of authority. Ultimately though, arbitrators, like judges, are human, and any such complaint against a particular arbitrator could be equally true of a judge. But there is a distinction: Judges are typically assigned by blind draw so that parties must accept any individual traits specific to the assigned judge.
Instead of waiting until the end, arbitration allows the trial lawyer to address these issues at the beginning by participating in the selection of an arbitrator. Generally, the arbitrators are fellow lawyers and professionals in our community, and we can research their reputation and skill as arbitrators. If advocates select wisely, then there should never be an issue concerning an arbitrator’s ability to render a thoughtful and considered award based on the evidence.
Commercial litigators move a stack of discovery from one pile to another waiting for a settlement, but trial lawyers actually try cases. This may be a tongue-in-cheek observation, but discovery is currently one of the largest expenses of time, effort, and money in litigation. The way discovery is conducted in arbitration makes it one of the largest cost savings and most significant distinctions from litigation.
The rules of arbitration do not provide for interrogatories or requests for admissions, but generally call only for the exchange of documents and, depending on the rules, one deposition of each party. Again, arbitration is a creature of the parties’ agreement, so this may oftentimes be modified by the parties’ mutual assent. If, for example, the parties agree that each side shall be afforded the deposition of four individuals, then it is likely that the arbitrator will include that provision in any preliminary scheduling order if so requested.
Third-party discovery is also more limited because an arbitrator does not have the same broad authority to compel third parties to give evidence. At the very least, arbitrators are empowered to issue subpoenas to third parties to testify at and bring documents to a hearing, which may be enforced by court order.
Some attorneys complain that they are unable to prepare a case without extensive discovery. This may be a result of a comfort from leaving no stone unturned. But is comprehensive—perhaps even excessive—discovery always necessary? If you consider your last few litigated cases, ask yourself what percentage of documents from discovery were actually considered by the trier of fact. What percentage of deposition testimony was used? Chances are that the discovery net was cast very wide to catch only a few critical, dispositive facts.
An eye-opening exercise is to consider the role of discovery in criminal cases. Even in the case of the most egregious offense, with few exceptions, discovery is exceptionally limited. Lawyers are expected to present their evidence at trial. Of course, the burden of proof is much higher and other safeguards exist, but full and unfettered discovery is not one of them. If these matters, which implicate liberty and social justice, can be resolved without 35 interrogatories, 30 requests for admissions, 50 requests for production, and 10 depositions, then a contract dispute may be adjudicated without the same level of prehearing discovery.
Trial lawyers should consider arbitration if only for the limited role of discovery in a case. With limited discovery, the matter will proceed to a resolution more quickly. Additionally, a case is less likely to become bogged down in prehearing procedures with less discovery, and consequently, fewer discovery disputes. The trial lawyer must rely on his or her own creativity and skill to craft the case theme and argument from the available facts without relying on mountains of paper.
Motion practice tends to be very limited in arbitration. This limitation is not intended to hamstring the advocates, but rather is a result of the practical aspects of the arbitration process. Understanding the practicalities of arbitration guides us in choosing what motions to file. The pleading standards are only intended to provide notice; therefore, a motion to dismiss can only be granted in the smallest number of clear-cut cases. In addition, because of the limitations on discovery, it is very difficult to conclusively establish the right to prevail as a matter of law prior to the final hearing, which limits the opportunity for a successful motion for summary judgment. The expedited nature of arbitration does not generally contemplate enough time to permit the briefing and consideration of dispositive motions or a continual stream of motions. Arbitration also provides less opportunity for the parties to gain tactical advantages by posturing their cases during pretrial tactics; therefore, there is less incentive to engage in motion practice. This point relates directly to the final reason: Arbitration is designed to be decided during a relatively short in-person, evidentiary hearing and not before.
There is certainly some level of motion practice in arbitration. In most instances, the motions relate directly to discovery obligations, requests for leave to amend to permit claims for punitive damages, and other brief necessary motions. Certainly there is no prohibition against motions being filed in arbitration, but the savvy counsel will pick and choose the best use of his or her time. For example, it is perfectly appropriate to file a motion to compel the production of documents if such materials are not forthcoming. But a motion for summary judgment in an expedited case with a final hearing scheduled in 45 days may have almost no chance of success.
Relaxed Rules of Evidence
Arbitration’s limitations on discovery may cause some trial lawyers discomfort because it is impossible to comprehensively examine each possible fact before the final hearing. In some degree, discovery in litigation is necessary to support certain procedures—such as motions for summary judgment—and fulfill certain evidentiary requirements. The limitations on discovery in arbitration are balanced by a relaxation on the procedural rules and the evidentiary requirements. Thus, in arbitration, a trial lawyer may not have the opportunity to depose records custodians to authenticate a party’s documents, but at the same time, there is a very high likelihood that self-evident business records will be accepted as evidence under the rules of arbitration. This also results in less time spent on obtaining evidentiary rulings.
This is not unlike a non-jury trial before an experienced judge. Many judges relax the evidentiary standards when a jury is not present to be unduly prejudiced and accept evidence with the comment that it “will be received and accorded the appropriate weight.” Arbitration is not any different. At the conclusion of the hearing, the arbitrator will evaluate the totality of the evidence and decide the merit and influence of each element in his or her deliberation.
Arbitration hearings are unlike any trial and tend to suit a trial lawyer’s personality. It is the opportunity to present your client’s case persuasively on a stage that encourages the full expression of facts and arguments. It is held in an informal setting, generally in a conference room with the arbitrator at the head of the table and the attorneys facing one another. The parties and counsel have the arbitrator’s full attention for the allocated time—whether half a day or two weeks—without the distraction of motion calendar hearings, emergency hearings, or other cases crowding the docket. Except in the case of gross abuse, the case moves at counsel’s pace, affording everyone an opportunity to present his or her client’s full argument.
A typical refrain from a good arbitrator is that he or she wants to hear all the evidence and understand each side’s position. In this sense, advocates should be prepared for the arbitrator to ask questions of counsel witnesses. Instead of viewing this as an interruption, accept an arbitrator’s questions as a guide to the points that he or she finds critical. Do not hastily jump back on track to your prepared questions. Instead, follow up with additional questions or make a note to raise new points relating to that issue at the appropriate point.
Most importantly for trial lawyers, the final hearing is truly an opportunity to be persuasive. Unlike typical litigation where a case has been whittled down to one or two issues through discovery and motion practice, an arbitration final hearing provides an opportunity to present your client’s full story. In most instances, when the final hearing arrives, the arbitrator has not made any substantive rulings on the case and is reviewing the evidence and law at the final hearing or just before it.
This raises the point of prehearing briefs. It is always a wise idea to provide the arbitrator with a prehearing brief that presents a synopsis of your client’s position, arguments, evidence, and legal authority. It educates the arbitrator and serves as a road map so that he or she can have an overview of the case as it develops during the hearing. It is easier to follow along at the final hearing if an overview has already been presented. The prehearing brief also serves another useful purpose by advising your opposing counsel of your client’s arguments and facts so that it cannot be later claimed that your opponent was ambushed.
While you want to fully develop your case, like any good trial lawyer you want to hone in on your best points—no more than three—and develop your theme. Because everything is presented at the final hearing, a trial lawyer has a full range of choices from the available theories, arguments, and evidence available for the facts. You are allowed to craft your arguments, prepare your client’s proofs, and structure the case into the tightest, most streamlined, compelling, and persuasive argument possible.
Most trial lawyers that handle business-related disputes, whether in the context of insurance, contracts, consumer disputes, or the like, will have a case that must be arbitrated. Instead of fearing the unknown or thinking that your case is stuck in “watered down” litigation, accept arbitration for what it is—i.e., an alternative to litigation. Use the process and you may find that the skills and challenges that drew you to trial practice will not only exist in arbitration, but may also be more appealing to you and your client.
John Arrastia Jr. is a trial lawyer, arbitration advocate, and arbitrator practicing in South Florida.
"Why Trial Lawyers Should Love Arbitration," by John Arrastia Jr., 2010, Minority Trial Lawyer 8:4. Copyright 2010 © by the American Bar Association. Reprinted with permission.