THE TOP 10 WAYS TO MAKE ARBITRATION FASTER AND MORE COST EFFECTIVE American Arbitration Association

Forty experienced arbitrators from across the United States were asked
what ten things they would tell CEOs and CFOs in order to maximize
the benefits of commercial arbitration. The arbitrators represent a
broad range of legal and business experience throughout the spectrum
of commercial and governmental law. Experience as an arbitrator
ranged from two years to forty years.

Arbitrators responding to the survey possessed wide experience in

both business and law:

• Partners in large and small law firms

• General Counsel
• Executive Vice Presidents
• Corporate Secretaries in large and small companies,
including family owned enterprises
• Law Professors
• Transaction Attorneys
• Litigation Attorneys
• Former Judges
• Legal Aid Attorneys
• Public Defenders
• US Attorneys
• State Attorneys
• International Law and Business
• State and Federal Agencies
• State Government Elected and Appointed Officials

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 THE TOP 10 WAYS TO MAKE ARBITRATION FASTER AND MORE COST EFFECTIVE American Arbitration Association

The top 10 ways to make

arbitration faster and more
cost effective
By: David L. Evans, Esquire India Johnson, President and CEO
Murphy & King American Arbitration Association®
Boston New York

But for arbitration to fulfill these expectations, companies and

their counsel must evaluate their practices and take steps to en-
sure that arbitration does not become the functional equivalent
of a trip to court. These “top ten tips,” gleaned from the expe-
riences of seasoned AAA® arbitrators, are a good starting point
for the true stakeholders – the parties – to understand how to
use the arbitration process to further their objectives.

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 THE TOP 10 WAYS TO MAKE ARBITRATION FASTER AND MORE COST EFFECTIVE American Arbitration Association

1 Pay Attention to Your Arbitration Clause Checklist for

Arbitration Clauses:
Thoughtlessly inserting a boilerplate arbitration clause into your contract can turn a
manageable dispute into a more time consuming, expensive and disruptive case. • Number and qualifications
Companies and their transactional lawyers carefully evaluate the business terms in their of arbitrators
contracts, but they often reflexively insert a boilerplate arbitration clause from other • Hearing locale
contracts or a form book. This oversight jeopardizes the inherent benefits of arbitration • Time (case duration) limits
and could result in a more expensive, disruptive and inefficient proceeding. It is vital • Discovery (including e-discovery) limits
to give up-front consideration to the details of the procedures most suitable to any • Attorney’s fees and arbitration costs
likely disputes under a contract and not simply hope for the best once hostilities have (divide equally or prevailing party)
arisen. While an entire article could be written on clause drafting (a checklist of issues is • Phased ADR regime (meet and confer,
included in the side bar), some key issues to address are: mediation, med/arb hybrid)
• Confidentiality (documents,
• Case deadlines testimony, award)
• Discovery limits • Dispositive motions
• Arbitrator selection and qualifications (summary judgment)
• Confidentiality • Form of award (reasoned or standard)
• Interim or injunctive relief
Courts have fixed rules of procedure regulating most aspects of a case. Arbitration is • Governing law and rules
a creature of contract, enabling the parties to tailor the process to fit their needs and
bypass litigation procedures. If you do not take advantage of this critical distinction, you
may well be relegated to a more cumbersome and costly proceeding. As an arbitration
administrator, the AAA has broad experience in these clause components, but you must
include AAA in the clause to access its expertise.

2 Select Attorneys Experienced in Arbitration

While arbitration should be economical and efficient, less experienced attorneys
often unnecessarily apply time-consuming litigation processes. While arbitration and
litigation are both adversarial proceedings, there are important differences between the
two and understanding those differences is critical to the cost- effective presentation of
a case. Lawyers unfamiliar with the arbitration process tend to treat arbitration as though
it were a court proceeding, resulting in requests (or even stipulations) for extensive
discovery, evidentiary skirmishes and unnecessary motion practice. Critically, since
arbitration should not be burdened with full blown litigation discovery, you should hire
a lawyer unafraid to try a case without having deposed every conceivable witness or
unearthed every document. And, it is totally appropriate to ask prospective counsel how
many arbitrations they have actually tried to conclusion! Make sure counsel understands
your business objectives and is prepared to take the straightest path towards the
fulfillment of those objectives.

Arbitration is a
creature of contract,
enabling the parties
to tailor the process
to fit their needs
and bypass litigation
procedures.

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 THE TOP 10 WAYS TO MAKE ARBITRATION FASTER AND MORE COST EFFECTIVE American Arbitration Association

3 Request and Enforce Budgets

Your arbitration decisions should be based on traditional cost-benefit or ROI analyses.
How many important business projects are launched without a budget? Arbitration
should be treated no differently. Companies should require their lawyers to prepare
and regularly update a budget for the various phases of the case (i.e. claim/answer,
discovery, witness preparation, experts, hearings, motions, and briefs), justify the line
items and track billings against the budget. Alternative fee arrangements such as
blended hourly rates, contingent fees or fixed fees should also be considered. Overall,
and absent special circumstances (e.g. customer relations or precedential concerns),
your arbitration decisions should be based on traditional cost-benefit or ROI analyses
familiar to most businesses.

4 Choose the “Right” Arbitrator

Researching an arbitrator with the right expertise, temperament and background
is an often overlooked yet essential step. Every arbitration award is rendered by a
human being, or panel of them, each with his or her own backgrounds and experiences.
Yet, it is surprising how little attention parties devote to the arbitrator selection process,
and specifically to identifying an arbitrator with the substantive expertise, temperament
and training to be receptive to the evidence. The first opportunity to narrow the field
begins with the arbitration clause itself. Ask yourself: if there is a dispute under the
contract, what will be the likely claim(s)? Do I want a lawyer to decide the claims, or an
accountant, or an engineer? Once the demand is filed, and the case administrator has
disseminated a list of arbitrator candidates (subject to any requirements specified in
the arbitration clause), businesses should review the arbitrators’ biographies, search the
internet and any public data bases, and, if appropriate, solicit feedback from those with
experience with the arbitrator. In short, conduct due diligence as you would with any
important business decision.

An entire seminar could be dedicated to arbitrator selection, but three additional points
are worth noting. First, the AAA’s Enhanced Neutral Selection Process enables the
parties to interview potential arbitrators or pose mutually agreeable written questions
to ascertain whether the arbitrator has the proper experience and disposition. The
process helps winnow the field to those arbitrators with the ability to exert requisite
management skills and handle any unique issues in the case. Second, parties should vet
carefully any clause which requires a three person panel and avoid whenever possible
a tripartite panel comprised of two party-appointed arbitrators. The running costs of a
panel case can be substantial and scheduling becomes more problematic. Third, if there
are a flurry of claims under your standard form contract, analyze what is wrong and fix it.
An arbitrator cannot be expected to provide relief from a bad agreement. Every arbitration
award is rendered
by a human being,
or panel of them,
each with his or her
own backgrounds
and experiences.

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 THE TOP 10 WAYS TO MAKE ARBITRATION FASTER AND MORE COST EFFECTIVE American Arbitration Association

5 Limit Discovery to What is Essential for the Arbitrator

Establish a strict discovery schedule focused on the exchange of necessary
information. Discovery costs are often the largest part of any litigation budget. But
this should not be the case in arbitration, especially if the arbitration clause specifies
that discovery will be limited to reasonable procedures consistent with the contours
of the dispute. Even if the clause is silent, it is in the parties’ mutual interests (and
is the duty of the arbitrator) to develop a discovery schedule that is restricted to
the exchange of information necessary (not merely desired) for the arbitrator to
understand and fairly decide the case. Written discovery requests (interrogatories
or requests for admissions) are rarely appropriate. Depositions of witnesses who will
testify at the hearings should be avoided, or at least confined to the key decision
maker(s). Document exchange is commonplace, but that practice must be given
special attention in this age of electronically stored information (ESI). E-discovery
has spawned its own cottage industry of consultants and experts, and budgets can
easily be exhausted in endless fields of back-up tapes, metadata, .pst files, and
TIFF images. Unless the parties can work out an ESI treaty on their own, the issue
should be presented to the arbitrator at the preliminary hearing. Even before a case
is actually filed, it is prudent to investigate the burden of producing ESI because it
could influence the decision on whether to file in the first instance.

6 Participate in the Preliminary Hearing

Gauge the arbitrator, hear the other side’s position and have a say in develop-
ing the schedule. The preliminary conference is the first occasion for the parties to
present their positions to the arbitrator and discuss a case schedule. This need not
be a lawyers-only gathering. Clients have the right to be present at the preliminary
hearing (most are conducted by conference call), and by participating you have the
ability to gauge the arbitrator, hear the other side’s unfiltered position and react to
the schedule being developed. The product of the conference is a case manage-
ment or scheduling order which codifies the arrangements from initial discovery
through issuance of the award. Be sure to review its terms. Thereafter, monitor any
requests for continuances or extensions of the deadlines, as you would with any
business project.

7 Limit Motion Practice

Potential motions must be scrutinized, as they are time-consuming and may
not have any practical significance. Companies and their counsel should con-
sider whether any potential motion truly “advances the ball.” Motions designed to
restrict evidence at the hearings (so-called motions in limine) may be inappropriate
Monitor any
because the formal rules of evidence do not apply in arbitration, and the arbitrator requests for
should rightfully consider evidence designed to further his or her understanding of continuances or
the case. Similarly, arbitrators may be reluctant to grant dispositive (summary judg-
ment) motions absent a stipulation by the parties because one of the few grounds extensions of the
for vacating an award under the Federal Arbitration Act is a refusal to hear mate- deadlines, as you
rial evidence. Consider suggesting to the arbitrator that any party wishing to file a
motion first seek permission so the arbitrator can assess its potential effect on the
would with any
case. At a minimum, have your attorneys explain the rationale for any motion, and business project
evaluate its possible efficacy in comparison to the risks and costs.

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 THE TOP 10 WAYS TO MAKE ARBITRATION FASTER AND MORE COST EFFECTIVE American Arbitration Association

8 Remain Open to Settlement

Keep an open mind and set aside emotions during the case as opportunities for
settlement develop. Few lawsuits proceed as scripted, and arbitration is no different.
Businesses need to be alert to case developments, and evaluate whether any new in-
formation affects the value of the case. Leave your emotions aside. Consider direct talks
with the adverse party’s management or the use of a mediator, and reassess the options
throughout the proceeding. Indeed, many cases settle during or after the hearings. As
arbitration administrator, the AAA usually attempts to include a voluntary mediation step
during your arbitration and, when adopted, many cases are settled or partially settled
prior to hearing. Even settling some of the disputes in a case can make the hearings
less expensive and quicker.

9 Trust the Expertise of the Arbitrator

Arbitrators have specialized knowledge in your field and are more receptive to the
facts of your case than to generalized pleas for fairness and equity. Attorneys who
regularly represent clients in arbitration recognize the differences between a jury case
and arbitration before someone knowledgeable about the industry or subject matter.
Arbitrators want to understand how your case fits into a framework which they already
have experienced. Present your claims in the clearest possible manner, with an eye
towards demonstrating how the particular facts of your situation warrant relief. Focus
on the key issues in dispute. Generalized pleas for fairness or equity are less likely to
resonate with the arbitrator.

10Present the Case Efficiently and Professionally

You play a critical role in completing the arbitration as efficiently and persuasively
as possible. By the time the first witness is sworn, procedures should be in place to
ensure that the hearings flow smoothly. Time limits should be considered. Exhibits
books containing stipulated exhibits should be pre-marked, with copies available for all
participants, including witnesses. Slides or demonstrative exhibits can be effective pre-
sentation tools, particularly for opening statements or complicated technical or damages
matters. The parties should have discussed any witness sequencing issues, considered
the use of video or web testimony and affidavits, and presented any witness disputes
to the arbitrator for disposition. Do have a party representative at the hearings. Do not
groan, scoff or chortle during an opponent’s case or slump in your chair after an unfavor-
able ruling or testimony. When testifying, direct your comments to the arbitrator and
avoid unnecessary sparring with counsel during cross-examination.

As the stakeholders with the greatest economic interest, the parties have the most to
gain from an efficient, fair and expeditious resolution of their dispute. Businesses, in
consultation with in-house and outside counsel, must assume ownership of the arbitration Few lawsuits
process to leverage the unique benefits of arbitration over court. With a customized arbi- proceed as scripted,
tration clause and careful monitoring of the proceeding, the parties are uniquely situated
to rein in costs and produce speedy outcomes. Attention to these ten tips will put the
and arbitration is
parties on the path towards better outcomes. no different.

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