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Bar News - October 15, 2014

Alternative Dispute Resolution: Alternatives in Arbitration: A Guide to Streamlining the Process


When lawyers decide to pursue arbitration, they often simply default to one of the national providers of arbitration services, such as the America Arbitration Association or JAMS. Although these providers can be of substantial assistance in many settings, there are several alternative structures that, depending on the nature of the issues presented, can prove more expeditious and cost-effective.

There are several factors to consider when drafting an arbitration agreement for your client.

Who’s Your Arbitrator?

First and foremost, consider whether you want your arbitrator to have a particular set of qualifications. Keep in mind that your arbitrator doesn’t need to be a lawyer, particularly if you’re dealing with a specialized industry. The whole idea behind arbitration is to resolve disputes quickly and inexpensively, and the best way to do that may be to employ an arbitrator who is familiar with your client’s particular type of business, or who possesses, either by education or experience, a particular type of specialized knowledge.

It’s important that both parties trust the arbitrator. In a small-town environment, the parties may already have a local lawyer, accountant or businessperson they both trust. It might make sense to appoint that person by name (although a back-up plan is always advisable, in the event that the person is unavailable or declines to serve).

Consideration should also be given to the scope of the arbitrator’s potential authority. Do you want the arbitrator, for example, to decide all disputes that relate to or arise out of the contract, or only particular types of disputes? Additionally, a lawyer may minimize court involvement by delegating to the arbitrator the authority to decide all matters relating to the scope of the arbitration clause, the formation/existence of the contract at issue, as well as questions relating to the arbitrator’s own jurisdiction.

Limiting Awards

Tales abound of run-away arbitration awards, so another drafting technique to examine is limiting the scope of the potential award. This can take many forms, including the establishment of an upper limit, as well as the exclusion of punitive or consequential damages.

Drafters may wish to look at the possibility of a “high-low” arbitral submission, in which the arbitrator is provided with a range that his award must fall between.

“Baseball” arbitration, where the arbitrator is presented with a potential award by each side and is compelled to accept one award or the other, thus eliminating the possibility of “splitting the baby,” has also become increasingly popular in recent years. Indeed, there’s even “night baseball,” where the parties exchange potential awards only with each another, but not with the arbitrator. Once the arbitrator’s decision is rendered, the potential award that is mathematically closest to it is adopted as the final award.

Other Considerations

In certain cases, the availability of interim or injunctive relief may be of vital importance. If a decision is made to eschew the national arbitration service providers, specific language should be used to make clear that the arbitrator has the authority to make such awards.

Additionally, and in keeping with the idea that discovery is supposed to be “quick and cheap,” attorneys considering entering into an agreement to arbitrate should give some thought to whether a hearing will even be necessary to resolve the dispute.

Many types of disagreements (for example, those related to simple lending transactions) can be resolved on a “documents-only” basis, obviating the need for a hearing (and the related expense).

Similarly, discovery limitations (or even exclusions) should be given a hard look. Discovery-related expenses can quickly eclipse the amount at issue in many arbitrable disputes.

If an attorney is concerned about creating a “hard and fast” clause that may later prove unworkable in the face of an unforeseen circumstance, it’s always possible to create a presumptive rule that can, upon a proper showing (“good cause,” perhaps), be disregarded by the arbitrator.

In cases where the disputes are not complex and can be submitted on documentation alone, it may be appropriate to include time limits that will govern how much time the parties have to make submissions following the identification of the dispute. In addition, a lawyer may wish to provide that the arbitrator must make a decision within a specific time frame and, failing that decision, the arbitrator is deprived of jurisdiction. If there’s a concern about too much inflexibility, simply include a clause that allows for additional time to be permitted upon a proper showing.

In the end, arbitration is, after all, a creature of contract. Lawyers can employ significant creativity in drafting arbitral clauses and tailoring them to the circumstances of their individual clients’ needs. The law provides significant latitude to do so in most cases.

Donald Frechette
Donald Frechette is a partner in the Hartford, Conn., office of Edwards Wildman Palmer. He has been a member of the New Hampshire bar since 1983 and practices primarily in the field of commercial litigation.

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