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In my previous article, I provided an overview of arbitration and what happens if one chooses to take this path. In this continuation, I discuss discovery and motion practice, arbitrator selection and the hearing, and the finality of arbitration.
Discovery and Motion Practice:
The two main areas in which arbitration may differ from a lawsuit is discovery and motion practice. Oftentimes, the most time-consuming and expensive part of a lawsuit is discovery.
Discovery in arbitration is managed by the arbitrator, who will usually attempt to keep reasonable limits on the types and scope of discovery that will be permitted. In addition, often times, depositions will not be allowed or allowed sparingly. Will these limitations contribute to keeping costs down? Absolutely. On the other hand, there is a certain amount of discovery that may very well be needed by the parties in order to properly prepare and litigate their case. Is more open-ended (and, therefore, costly) discovery necessary in a particular dispute? To the extent that you are able to determine this prior to agreeing to arbitration—meaning, you have not already entered into an agreement requiring the arbitration of disputes—it should be carefully weighed by a party and her attorney; and, perhaps, with the opposing party, prior to agreeing to arbitration. If you are first considering whether to include a mandatory arbitration clause in an agreement and wish to designate one of the established arbitration service providers as the forum, you should review the rules of the providers with your attorney and consider whether the rules of one may be more beneficial to you than the rules of another given the types of disputes that you envision may arise.
Many arbitrators, and arbitration service providers, try and limit, or may even prohibit, the making of dispositive motions, such as motions to dismiss or motions for summary judgment. This, too, will save the parties the cost of making or defending such a motion. On the other hand, a meritorious, dispositive motion can help resolve the case before the parties incur the cost and expense, and the time required to participate in, a hearing. While it may certainly be premature to anticipate whether a dispositive motion would be useful in a particular dispute, the parties may want to make sure that they are aware of the rules of an arbitration provider before agreeing on the selection of an arbitration service provider.
The Selection of the Arbitrators and the Hearing:
An arbitration hearing may be very much like a trial. However, unlike in a traditional lawsuit, where cases are usually assigned to particular judges, with their strengths, weaknesses, and differing levels of expertise of particular subject matters, parties in an arbitration can usually participate in the selection of the arbitrator or arbitrators who will decide their case. In addition, many of the providers have panels of arbitrators with special expertise in particular areas, for the parties to choose from. Having a knowledgeable arbitrator or panel of arbitrators may be very appealing to parties generally, and especially in particular areas, such as construction claims, labor matters, intellectual property disputes, and the like.
Finality:
The biggest risk, but also to some the biggest advantage of arbitration, is the finality of an arbitration award. Although both the Federal Arbitration Act and New York Arbitration Law provide grounds by which an arbitration award can be overturned, they are very, very narrow; usually, absent fraud, a conflict of interest on the part of the arbitrator, or something egregious having taken place, the arbitration award will be confirmed and, upon application of the prevailing party, a judgment rendered by the court in her favor.
In the recent dispute between the NFL and Tom Brady, in its “Deflategate” decision, the Second Circuit Court of Appeals overturned the lower court’s decision, which set aside the arbitration award. The court held that its function was not to decide whether the arbitrator’s decision was correct or incorrect; it was to make sure, in the absence of fraud or any of the very few grounds for the setting aside of an arbitration award, that the parties adhered to the written arbitration agreement—in that case, the collective bargaining agreement—which provided for arbitration and the manner in which it would be conducted.
So, the decision as to whether to agree to an arbitration clause while negotiating a contract, or to agree to arbitrate a dispute after one arises even in the absence of an agreement, can be a complicated one. But the law encourages arbitration as an efficient and quicker manner in which to resolve the dispute, and parties should think very seriously about availing themselves of the opportunity to do so.
Contact me today with questions or comments.
Footnote:
1 “The basic principle driving both our analysis and our conclusion is well established: a federal court’s review of labor arbitration awards is narrowly circumscribed and highly deferential—indeed, among the most deferential in the law. Our role is not to determine for ourselves whether Brady participated in a scheme to deflate footballs or whether the suspension imposed by the Commissioner should have been for three games or five games or none at all. Nor is it our role to second-guess the arbitrator’s procedural rulings. Our obligation is limited to determining whether the arbitration proceedings and award met the minimum legal standards established by the Labor Management Relations Act, 29 U.S.C. § 141 et seq. (the “LMRA”). We must simply ensure that the arbitrator was “even arguably construing or applying the contract and acting within the scope of his authority” and did not “ignore the plain language of the contract.” United Paperworks Int’l Union v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987). These standards do not require perfection in arbitration awards. Rather, they dictate that even if an arbitrator makes mistakes of fact or law, we may not disturb an award so long as he acted within the bounds of his bargained-for authority.” National Football League Management Council v. National Football League Players Association, 820 F.3d 527,532 (2d Cir. 2016).
