Transcript Avoiding and Resolving Conflict

PROMOTING SPEED AND
ECONOMY IN ARBITRATION:
NEW GUIDELINES FOR IN-HOUSE AND
OUTSIDE COUNSEL, PROVIDERS AND
ARBITRATORS IN THE U.S.
Thomas J. Stipanowich
William H. Webster Chair in Dispute Resolution
Professor of Law, Pepperdine University School of Law
Academic Director, Straus Institute for Dispute Resolution
Chartered Institute of Arbitrators, East Asia Branch
Hong Kong Club
June 29, 2010
“The moon waxes only to wane, and
water surges only to overflow.”
Ancient Chinese Idiom
The U.S.“vanishing” trial
The portion of federal court cases resolved by trial
fell from 11.5 % in 1962 to 1.8 % in 2002. Significant
declines are also observable in state courts.
Reasons for reduction in
trial…
 High cost of litigation, especially discovery
 Risk, uncertainty
 Impact on business, relationships
“Because of expense and delay, both civil
bench trials and civil jury trials are
disappearing.”
“Our discovery system is broken.”
FINAL REPORT ON THE JOINT PROJECT OF THE AMERICAN COLLEGE OF TRIAL
LAWYERS TASK FORCE ON DISCOVERY AND THE INSTITUTE FOR THE
ADVANCEMENT OF THE AMERICAN LEGAL SYSTEM (Mar. 11, 2009)
Document discovery alone accounts
for 50% of litigation costs in the
average case, and 90% in active
discovery cases.
Judicial Conference Adopts Rule Changes, Confronts
Projected Budget Shortfalls, THE THIRD BRANCH,
(Admin. Office of the U.S. Courts)(Oct. 1, 1999)
E-discovery
“[E]lectronic discovery is a nightmare
and a morass.”
FINAL REPORT ON THE JOINT PROJECT OF THE AMERICAN
COLLEGE OF TRIAL LAWYERS TASK FORCE ON DISCOVERY AND
THE INSTITUTE FOR THE ADVANCEMENT OF THE AMERICAN LEGAL
SYSTEM (Mar. 11, 2009)
Of the [electronic discovery] data analyzed,
only 10-20 percent of that ends up being
relevant while a staggering 80-90 percent is
irrelevant and non-responsive to the case.
Eric Rosenberg, Get Smart About Analyzing ESI,
Legal Tech Newsletter (Feb. 15, 2008)
In the business world…
There always is more information, sometimes a
great deal more, that one might have if one
waited longer or worked harder to get it—but the
delay and the cost are not warranted. On an
important decision one rarely has one hundred
percent of the information needed for a good
decision no matter how much one spends or how
long one waits.
Robert Greenleaf, Management Expert, AT&T
Too much of a good thing?
China Daily Monday, December 8, 2008
Woman deafened by
passionate kiss
A young lady lost her hearing after a
passionate kiss from her boyfriend
in Zhuhai, Guangdong province.
Unresolved conflict…
 takes time and energy from other pursuits
 may lead to psychological and health problems
 often escalates, with parties resorting to heavier,
more contentious tactics
 …with parties becoming more committed to the
struggle
DEAN G. PRUITT & SUNG HEE KIM, SOCIAL CONFLICT:
ESCALATION, STALEMENT AND SETTLEMENT Ch. 2
(3rd ed. 2004)
”Although the civil justice system is not broken,
it is in serious need of repair. In many
jurisdictions, today’s system takes too long and
costs too much. Some deserving cases are not
brought because the cost of pursuing them fails
a rational cost-benefit test while some other
cases of questionable merit and smaller cases
are settled rather than tried because it costs too
much to litigate them.”
FINAL REPORT ON THE JOINT PROJECT OF THE AMERICAN COLLEGE
OF TRIAL LAWYERS TASK FORCE ON DISCOVERY AND THE INSTITUTE
FOR THE ADVANCEMENT OF THE AMERICAN LEGAL SYSTEM
(Mar. 11, 2009)
There is a need for a wide range of critical
changes in the landscape of American
litigation, including an end to the “‘one
size fits all’ approach of the current
federal and most state rules.”
FINAL REPORT ON THE JOINT PROJECT OF THE AMERICAN COLLEGE OF
TRIAL LAWYERS TASK FORCE ON DISCOVERY AND THE INSTITUTE FOR
THE ADVANCEMENT OF THE AMERICAN LEGAL SYSTEM (Mar. 11, 2009)
Why arbitration?
Why do many companies continue to choose
arbitration as a method for resolving businessrelated disputes?
• Saves time
• Saves money
• More satisfactory process than litigation
• Limited discovery [and motion practice]
• Neutral expertise
• Privacy
Cornell/PERC/PriceWaterhouse Survey
of Fortune 1,000 Companies (1997)
Choice: The basic element…
Ultimately, many business users regard control
over the process—the flexibility to make
arbitration what you want it to be—as the
single most important advantage of binding
arbitration and other forms of ADR.
CPR COMMISSION ON THE FUTURE OF ARBITRATION,
COMMERCIAL ARBITRATION AT ITS BEST (2001)
Choice: The basic element…
 Business needs and goals in dispute
management vary.
 Arbitration affords parties flexibility and
autonomy in making process choices.
 If possible, arbitration should be tailored to
specific needs and goals.
CPR COMMISSION ON THE FUTURE OF ARBITRATION,
COMMERCIAL ARBITRATION AT ITS BEST (2001)
Expansion of binding
arbitration in late 20th C.
All kinds of
Civil disputes
Consumer
Traditional realms
Co
of binding arbitration
Employment
Emerging
Global
Markets
Current pressures on
arbitration
Complaints by
Business
Competing
Options:
Mediation,
DRBs, etc.
Attacks by
Consumer/
employee
advocates
Stepped
Approaches
to managing
conflict
2004 Fulbright & Jaworski
Survey of 300 Corporate Counsel
General Attitudes Regarding Domestic Arbitration
36%
Disfavored
21%
Neutral
43%
Favored
0
10
20
30
40
50
60
70
80
90
100
Complaints about arbitration
• Limited appeal
• Compromise outcomes
• Lack of confidence in arbitrators
• Lack of qualified arbitrators, uneven
administration
• Too costly
• Too long
• “Too much like litigation”
“Arbitration is often unsatisfactory because
litigators have been given the keys to run the
arbitration and they run it exactly like a piece
of litigation. It’s the corporate counsel’s fault
by simply turning over the keys to a matter.”
Jeffrey W. Carr
Vice President & General
Counsel
FMC Technologies, Inc.
“[I]f you simply provide for arbitration under
[standard rules] without specifying in more
detail . . . how discovery will be handled . . . you
will end up with a proceeding similar to
litigation.”
James Bender,General Counsel,
Williams Companies
“The overriding objectives [of business in
choosing an appropriate forum for resolving
disputes] . . . are fairness, efficiency (including
speed and cost) and certainty in the
enforcement of contractual rights and
protections. . . . Too often the practice of
[arbitration focuses] . . . on perceived concepts
of due process to the detriment of efficiency,
resolution and certainty.
GE Corporate Counsel
Mike McIlwrath, Roland Schroeder
“I’m here to tell you that . . . our current
experience is that we are getting quicker and
more cost-effective results in U.S. courts!”
Corporate counsel
for a leading global corporation
The vanishing default
arbitration clause?
• E.g., American Institute of Architects
Contract Documents (2007 edition)
• E.g., New “Consensus” Construction
Contract Documents (2007)
Int’l arbitration costs v.
litigation
Fulbright Litigation Trends Survey (2007)
2005 Response
2006 Response
More
than
6%
More
than
21%
Less
than
32%
Same
62%
Less
than
26%
Same
53%
Int’l arbitration costs v.
litigation
Fulbright Litigation Trends Survey (2007)
2006 Response
2007 Response
More
than
21%
Less
than
26%
Same
53%
More
than
Less 16%
than
9%
Same
75%
Int’l arbitration time to
resolution v. litigation
Fulbright Litigation Trends Survey (2007)
2006 Response
2007 Response
More
than
15%
Same
42%
Less
than
43%
More
than
Less
11%
than
11%
Same
78%
In arbitration, choice is
the basic element…
Ultimately, many business users regard control
over the process—the flexibility to make
arbitration what you want it to be—as the
single most important advantage of binding
arbitration and other forms of ADR.
CPR COMMISSION ON THE FUTURE OF ARBITRATION,
COMMERCIAL ARBITRATION AT ITS BEST (2001)
National Summit on the Future
of Commercial Arbitration
Washington, Oct.30, 2009
Sponsored by the
College of Commercial Arbitrators
with support from:
American Arbitration Association
JAMS
International Institute for Conflict Prevention &
Resolution (CPR)
ABA Section of Dispute Resolution
Chartered Institute of Arbitrators
Straus Institute for Dispute Resolution
National Summit . . .
 National gathering of more than 180 invited inhouse counsel, outside counsel, arbitrators and
“providers”
 Based on two key insights:
 Lengthy, costly arbitration results from the
interaction of business users; in-house attorneys;
institutions providing arbitration and other
dispute resolution services; outside counsel; and
arbitrators.
 All of these stakeholders must play a role in
achieving desired efficiencies and economies in
arbitration.
 “Town hall” meeting with electronic voting
National Summit Response
How often do business users desire arbitration
to be speedier, more efficient and more
economical than litigation?
National Summit Response
In your experience, how often does arbitration
fail to meet the desires of business users when
they want speed, efficiency and economy?
What are the Barriers to Containing
Cost and Time in Arbitration?
National Summit Response
If you believe arbitration fails to meet the
desires of business users regarding speed,
efficiency and economy, to what extent does
excessive discovery tend to contribute to that
result?
National Summit Response
If you believe arbitration fails to meet the desires of
business users regarding speed, efficiency and
economy, to what extent does excessive,
inappropriate or mismanaged motion practice tend
to contribute to that result?
National Summit Response
If you believe arbitration fails to meet the desires of
business users regarding speed, efficiency and
economy, to what extent do too-lengthy hearings
tend to contribute to that result?
Who Should Be
Part of the Solution?
Users; In-house Counsel
• …lay the groundwork for arbitration by
crafting/selecting the arbitration provision and
procedures
• …choose the advocates and have a voice in
selecting the arbitrators
• …set the budget
• …provide overall direction to counsel
• …participate in the pre-hearing process
National Summit Response
When arbitration fails to meet the desires of business
users regarding speed, efficiency and economy, how
much more can corporate in-house counsel do to
help fulfill those expectations before disputes arise?
National Summit Response
When arbitration fails to meet the desires of
business users regarding speed, efficiency and
economy, how much more can corporate in-house
counsel do to help fulfill those expectations once the
decision is made to arbitrate a dispute?
Outside Counsel/Advocates
• …may have input on the arbitration agreement
and procedures
• …may educate the client about how to realize
arbitration’s benefits
• …may be relied on to guide strategy and tactics
in arbitration, including arbitrator selection
• …may, in company with opposing counsel,
establish parameters for and “complexion” of
arbitration
National Summit Response
When arbitration fails to meet the desires of
business users regarding speed, efficiency and
economy, how much more can outside counsel
(advocates in arbitration) do to help fulfill those
expectations?
Arbitrators
• …may shape or heavily influence the
arbitration process
• …may effectively “mediate” between parties
with different objectives
• …may tailor the process to parties’ needs
• …may affect the expense and duration of
arbitration by their management of discovery,
motions, hearings
National Summit Response
When arbitration fails to meet the desires of
business users regarding speed, efficiency and
economy, how much more can arbitrators do to
help fulfill those expectations?
Provider Institutions
• …are heavily relied upon by drafters to
produce effective templates for B2B
arbitration; often emphasize a single onesize-fits-all template
• …put their stamp of approval on arbitrators
who are charged with managing the process
• …have a direct impact on process duration
and party satisfaction through
administrative functions
National Summit Response
When arbitration fails to meet the desires of
business users regarding speed, efficiency and
economy, how much more can institutions that
provide arbitration rules, panels and
administrative services do to help fulfill those
expectations?
CCA Protocols
for Expeditious, Cost-Effective Commercial
Arbitration
• 4 sets of guidelines aimed at business users
and in-house counsel; outside counsel;
arbitrators and provider institutions.
• Product of National Summit and later
feedback from participants.
• To be published in Summer, 2010 with
accompanying commentary and reference to
helpful current resources
Protocol for Business Users
& In-house Counsel
• 1. Use arbitration in a way that best serves economy,
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efficiency and other business priorities. Be deliberate about
choosing between “one-size-fits-all” arbitration procedures
with lots of “wiggle room” and more streamlined or bounded
procedures.
2. Limit discovery to what is essential; don’t simply
replicate court discovery.
3. Set specific time limits on arbitration and make sure they
are enforced.
4. Use “fast-track arbitration” in appropriate cases.
5. Stay actively involved throughout the dispute resolution
process to pursue speed and cost-control .
Protocol for Business Users
& In-house Counsel
• 6. Select outside counsel for arbitration expertise and
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commitment to business goals.
7. Select arbitrators with strong case management skills.
8. Establish guidelines for early “fleshing out” of issues,
claims, defenses, and parameters for arbitration.
9. Control motion practice.
10. Use a single arbitrator in appropriate circumstances.
11. Specify the form of the award. Don’t provide for judicial
review for errors of law or fact.
12. Conduct a post-process “lessons learned” review and
make appropriate adjustments.
Protocol for Arbitration
Providers
• 1. Offer business users clear options to fit their priorities.
• 2. Promote arbitration in the context of a range of process
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choices, including stepped dispute resolution processes.
3. Develop and publish rules that provide effective ways of
limiting discovery to essential information.
4. Offer rules that set strict presumptive deadlines for
completion of arbitration; train arbitrators in the importance
of enforcing stipulated deadlines.
5. Publish and promote “fast-track” arbitration rules.
6. Develop procedures that promote restrained, effective
motion practice.
Protocol for Arbitration
Providers
• 7. Require arbitrators to have training in process
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management skills and commitment to cost- and timesaving.
8. Require fact pleadings, early disclosure of documents and
witnesses.
9. Provide for electronic service of submissions and orders.
10. Obtain and make available information on arbitrator
effectiveness.
11. Provide for expedited appointment of arbitrators.
12. Require arbitrators to confirm availability.
13. Afford users an effective mechanism for raising and
addressing concerns about arbitrator case management.
Protocol for Outside Counsel
• 1. Be sure you can pursue the client’s goals expeditiously.
• 2. Memorialize early assessment and client understandings.
• 3. Select arbitrators with proven management ability. Be
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forthright with the arbitrators regarding your expectations
of a speedy and efficient proceeding.
4. Cooperate with opposing counsel on procedural matters.
5. Seek to limit discovery in a manner consistent with client
goals.
6. Periodically discuss settlement opportunities with your
client.
7. Offer clients alternative billing models.
Protocol for Outside Counsel
• 8. Recognize and exploit the differences between arbitration
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and litigation.
9. Keep the arbitrators informed and enlist their help
promptly; rely on the chair as much as possible.
10. Help your client make appropriate changes based on
lessons learned.
11. Work with providers to improve arbitration processes.
12. Encourage better arbitration education and training.
Protocol for Arbitrators
• 1. Get training in managing commercial arbitrations.
• 2. Insist on cooperation and professionalism.
• 3. Actively manage and shape the arbitration process;
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enforce contractual deadlines and timetables.
4. Conduct a thorough preliminary conference and issue
comprehensive case management orders.
5. Schedule consecutive hearing days.
6. Streamline discovery; supervise pre-hearing activities.
7. Discourage the filing of unproductive motions; limit
motions for summary disposition to those that hold
reasonable promise for streamlining or focusing the
arbitration process, but act affirmatively on those.
Protocol for Arbitrators
• 8. Be readily available to counsel.
• 9. Conduct fair but expeditious hearings.
• 10. Issue timely and careful awards.
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