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Young Lawyers: Assessing the Strengths and Weaknesses of a Pending Arbitration

By P. Jean Baker – July 30, 2015


Arbitration has been described as old-time litigation on steroids—limited discovery, no depositions, few constrains on demonstratives, and decision makers who may or may not be attorneys. But arbitration is a wonderful dispute resolution mechanism provided you understand how it works. If you did not take an ADR course in law school, you will probably obtain your knowledge firsthand—namely by representing a client in a pending arbitration. That can be a scary proposition when the amount in controversy runs into the high six figures.


So how can a young lawyer safely learn the ins and outs of the arbitration process? The American Arbitration Association (AAA) has recently introduced a new online tool—CaseXplorer. A user selects a panel of three to five evaluative arbitrators. The selected arbitrators can have the same or different legal or professional backgrounds. The user presents his or her case online by means of written or video content. The user then asks each arbitrator to independently respond to questions drafted by the user that are designed to elicit perceptions and opinions regarding the strengths and weaknesses of the facts, the legal arguments, videotaped testimony, and the manner of the presentation.


Depending upon the way the questions are drafted, the focus of the online evaluation can be either exploratory or confirmatory. An exploratory online evaluation is targeted at examining how arbitrators think—their potential preconceptions, what they need to know in advance, what they need to learn during the presentation, and the process they will use to evaluate the evidence and reach decisions. Typically arbitrators selected to conduct an exploratory evaluation have different legal or professional backgrounds. This enables the attorney to ascertain to what extent different backgrounds might impact presentation of the case. The final report issued by the arbitrators will provide valuable information concerning the themes, evidence, and arguments that were perceived as the most convincing; the misconceptions and misunderstandings that arose during presentation of the client’s case; and perceptions of videotaped presentations conducted by witnesses, experts, and counsel.


In contrast, a confirmatory online evaluation is focused on ascertaining the likely outcome at arbitration. Arbitrators selected for this type of process typically have similar legal or professional backgrounds, such as retired judges or experienced commercial litigators. With proper design of the questions and selection of the arbitrators, a confirmatory evaluation can provide results that effectively foreshadow the actual arbitration award. The attorney can ask the arbitrators to address the effectiveness of exhibits and demonstratives as well as witness credibility, likeability, and persuasiveness. The information derived in a confirmatory evaluation can be a powerful tool if the dispute is going to be mediated prior to arbitration, a client’s expectations need a reality check, or presentation of the case involves revealing the existence of a “smoking gun” by your client.


This process is not inexpensive—$15,750 for three arbitrators and $21,250 for five arbitrators. These costs, however, pale in comparison with the cost of losing a high-stakes case.


For the attorney with experience representing clients in arbitration, CaseXplorer can assist with the creation of a decision tree. Long used by business people to model business decisions, decision analysis is widely used by the legal community as a tool for decision making in complex litigation. The tree typically consists of at least two branches under the direct control of the parties—litigate or settle? The same basic decisions confront counsel in arbitration—accept a settlement offer or arbitrate? Adding to the complexity of the decision-making process, counsel should also consider including a third branch—the “chance” branch. This branch tracks the impact of variables over which counsel does not have direct control.


The key thing to understand about decision analysis—the outcome is only as valuable as the input. Methodically thinking through the hurdles that need to be surmounted in order to prevail can help even the most experienced attorney organize his or her thinking. Furthermore, performing more advanced calculations, referred to as sensitivity analysis, will assist with identification of variables that will have the greatest impact on case value.


CaseXplorer can help counsel and the client assign realistic probability and payoff assessments, identify uncertainties, and dispassionately evaluate the potential impact on the outcome. Using CaseXplorer to help establish realistic probabilities may not result in payoff estimates a client was unrealistically hoping to achieve. But a client can escape the feeling that settlement is nothing more than an irrational capitulation to the other side. By engaging with counsel in in-depth logical decision analysis, clients will be able to effectively separate their emotions and egos from the settlement decision.


Keywords: litigation, ADR, arbitration, decision analysis, sensitivity analysis, settlement


P. Jean Baker is a vice president in the Commercial Division of the American Arbitration Association in Washington, D.C.


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