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Top Five Myths about Commercial Arbitration

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Top Five Myths about Commercial Arbitration

Source: The Recorder
Date: September 7, 2015
Monday, September 7, 2015 An Publication www.therecorder.com Reprinted with permission from the September 7, 2015 edition of THE RECORDER © 2015 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com. Top Five Myths about Commercial Arbitration By Zee Claiborne, Esq., JAMS P ersistent misconceptions about ar- bitration may discourage some from using this economical alternative to court trials. Here are a few of those myths along with the reality of com- mercial arbitration practice: Myth #1: The terms of the ADR provision are written in stone Despite strong disagreements on the mer- its, counsel often find it mutually beneficial to modify the process to suit the case at hand. Parties regularly stipulate to modify the arbi- tration provision, including changing the pro- vider administering the case, the applicable rules, appeal procedure, the number of arbi- trators, time to prepare for and hold hearings, or the number of hearing days. Myth #2: Arbitrators do not follow the law Perhaps this myth stems from the fact that the arbitration process is more informal than a court trial. However, the law that will apply to the merits of a case usually is set forth in the parties’ arbitration provision. If not, the selection of applicable law is discussed and determined at the preliminary conference with the panel. Arbitrators are guided by the rules of law specified by the parties and, if al- lowed by the parties’ contract and the govern- ing arbitration rules, by the rules of equity. A reasoned arbitration award should outline the key issues and the decision of the panel as supported by the evidence and the law. Myth #3: Arbitrators are reluctant to manage with a firm hand One of the strongest trends in arbitration has been to make the process both efficient and fair by encouraging arbitrators to be de- cisive and managerial. For example, arbitra- tors may limit motion practice, encourage the parties to split hearing time on a 50/50 basis, limit time for opening statements, limit objections and request written statements in place of direct examination of witnesses. Counsel should review the background of potential arbitrators to find those who take a managerial approach and may even want to interview candidates to inquire about their management of the process. Myth #4: Arbitration discovery is insufficient Counsel often specify the Federal Rules or state discovery rules in their arbitration agree- ments in the belief that discovery under most arbitration rules is insufficient. However, one of the benefits of arbitration is speedy and ef- ficient resolution. Arbitrators are empowered under most rules to limit the exchange of in- formation so that the amount of discovery is in proportion to the size of the dispute. Coun- sel have a role in this effort and should work to prepare a reasonable discovery plan. Myth #5: Arbitrators “split the baby” One of the most persistent myths is that arbitrators “split the baby. ” Parties concerned about that risk should select seasoned arbitra- tors who will review the evidence and follow the law. Counsel might also consider specify- ing “baseball” arbitration, where the arbitra- tors must choose between damages amounts urged by each party. Ultimately, counsel and their clients may want to give arbitration a second look, re- examining these arbitration stereotypes and taking a fresh look at the benefits of a flexible process. Visit the JAMS Arbitration Practice page for more information. Zee Claiborne, Esq. is a panelist with JAMS in San Francisco and specializes in the resolution of com- plex domestic and international business disputes. She can be reached at zclaiborne@jamsadr.com.

Top Five Myths about Commercial Arbitration
By Zee Claiborne, Esq., JAMS

Persistent misconceptions about arbitration may discourage some from using this economical alternative to court trials. Here are a few of those myths along with the reality of commercial arbitration practice:

Myth #1: The terms of the ADR provision are written in stone

Despite strong disagreements on the merits, counsel often find it mutually beneficial to modify the process to suit the case at hand. Parties regularly stipulate to modify the arbitration provision, including changing the provider administering the case, the applicable rules, appeal procedure, the number of arbitrators, time to prepare for and hold hearings, or the number of hearing days.

Myth #2: Arbitrators do not follow the law

Perhaps this myth stems from the fact that the arbitration process is more informal than a court trial. However, the law that will apply to the merits of a case usually is set forth in the parties' arbitration provision. If not, the selection of applicable law is discussed and determined at the preliminary conference with the panel. Arbitrators are guided by the rules of law specified by the parties and, if allowed by the parties' contract and the governing arbitration rules, by the rules of equity. A reasoned arbitration award should outline the key issues and the decision of the panel as supported by the evidence and the law.

Myth #3: Arbitrators are reluctant to manage with a firm hand

One of the strongest trends in arbitration has been to make the process both efficient and fair by encouraging arbitrators to be decisive and managerial. For example, arbitrators may limit motion practice, encourage the parties to split hearing time on a 50/50 basis, limit time for opening statements, limit objections and request written statements in place of direct examination of witnesses.

Counsel should review the background of potential arbitrators to find those who take a managerial approach and may even want to interview candidates to inquire about their management of the process.

Myth #4: Arbitration discovery is insufficient

Counsel often specify the Federal Rules or state discovery rules in their arbitration agreements in the belief that discovery under most arbitration rules is insufficient. However, one of the benefits of arbitration is speedy and efficient resolution. Arbitrators are empowered under most rules to limit the exchange of information so that the amount of discovery is in proportion to the size of the dispute. Counsel have a role in this effort and should work to prepare a reasonable discovery plan.

Myth #5: Arbitrators "split the baby"

One of the most persistent myths is that arbitrators "split the baby." Parties concerned about that risk should select seasoned arbitrators who will review the evidence and follow the law. Counsel might also consider specifying "baseball" arbitration, where the arbitrators must choose between damages amounts urged by each party.

Ultimately, counsel and their clients may want to give arbitration a second look, reexamining these arbitration stereotypes and taking a fresh look at the benefits of a flexible process. Visit the JAMS Arbitration Practice page for more information.

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