Under the case plan, motions are made, responded to, and decided on an informal fast track by email. (One of the authors uses this approach, so that motions are typically made, responded to, and decided, all by email, within one business day.)
Dispositive-motion proposals are encouraged, but can be filed only with the arbitrator’s approval, per AAA Commercial Rule 33, so that the parties won’t incur the expense of briefing without first discussing whether it makes sense to do so.
Motions to modify deadlines or limitations are approved if agreed to by the parties’ in‑house representatives (in most cases); this gives all participants an incentive to keep the case moving.
The hearing and award are expedited
Given that most direct testimony is provided by written witness statement, much of the hearing likely can be conducted in a somewhat-informal, almost-conversational style to save time and clarify testimony.
The arbitrator can choose to circulate a draft final award, to give counsel a chance to comment before the final award is officially issued: This is modeled on what some California trial courts do with motion-practice decisions; it’s also suggested by MCL 11.32 for motion practice.
If so agreed by the parties, “baseball”-style arbitration can be used to determine the amount of damages to be awarded and other numerical-type issues. This can help encourage the parties to get closer to settlement by, in effect, forcing each party to consider whether the arbitrator might regard the other party’s position as being the more reasonable of the two.
If so agreed by the parties, the award can be appealed to a separate appellate arbitration panel under the AAA’s appellate rules, but only if so agreed by the parties at the outset of the case.
Also if so agreed by the parties, the award can be made non-binding until a short period of time has elapsed, so that a losing party can file suit in court—but with significant incentives to encourage both parties to accept the award. (This provision is modeled on similar statutory schemes.)
The Scheduling Order makes it clear that the arbitration process is owned by the parties; it gives the arbitrator discretion to require the parties themselves not just their counsel to approve modifications of discovery limitations, postponements of the hearing date, etc. Such a requirement should help to keep costs down and the case moving.
This requirement was inspired by how one Texas arbitrator (not one of the authors) handled an unopposed request by one party’s counsel for a third continuance of the hearing date. On a conference call in that case, the arbitrator reminded counsel that the request came less than four weeks before the hearing, which had been established at the outset as the time frame that would trigger a requirement to pay the arbitrator his standard cancellation fee.
The arbitrator accordingly advised counsel that he would approve the unopposed request for a third continuance, but only if the parties paid his cancellation fee. At that point, the lawyer for the other party, whose client had been listening in on the conference call, announced that his client now opposed the third continuance request.
The arbitrator accordingly denied the continuance request and left the hearing date as it was—and the parties settled their dispute on the eve of the hearing date. (The arbitrator in question has authorized telling the story here but wishes to remain anonymous.)
The goal of the Scheduling Order is to offset
the cost-increasing incentives of arbitration
The Scheduling Order can help to neutralize the subtle incentives that can contribute to delay and expense of the arbitration process. Berkshire Hathaway’s vice-chairman Charles Munger has said that “Never a year passes but I get some surprise that pushes a little further my appreciation of incentive superpower. * * * Never, ever, think about something else when you should be thinking about the power of incentives.” Charles T. Munger, The Psychology of Human Misjudgment, at http://goo.gl/ty2Ogh (law.indiana.edu, accessed Nov. 23, 2014).
Let’s review some of the incentives that can result in creeping expense and delay in arbitration:
• The parties’ business people and their counsel want to win, and probably equally, to avoid losing. That can incline counsel toward seeking more and more discovery, both to solidify the client’s case and to get a look at the other side’s cards. As a leading arbitration scholar has observed: “For lawyers accustomed to full-fledged discovery, anything less may seem tantamount to inviting claims of malpractice.” Stipanowich, supra, at 12 (footnotes omitted).
• Some litigators like to be perceived as relentless warriors, thinking it will impress their clients and adversaries. These worthies sometimes force opposing counsel to jump through every possible hoop and decline to stipulate anything, even though this increases the expense for all concerned. (To be sure, that’s sometimes due at least in part to client pressure: “an angry client, rather than the attorney, is often the person responsible for an ‘admit nothing’ posture in the litigation.” MCL 11.471.)
• Some lawyers secretly fear going to trial and therefore welcome any excuse for delay. See Stipanowich, supra, at 12‑13. (Even the relentless-warrior types mentioned above can fall into this category.)
• Of course, lawyers who bill by the hour stand to benefit economically when arbitrations drag on.
• An arbitrator won’t want to risk being held by a court to have violated the One Great Rule of Arbitration: Thou shalt not refuse to hear evidence pertinent and material to the controversy (paraphrasing 9 U.S.C. § 10(a)(3)), because under the Federal Arbitration Act, that’s one of the few ways to have your award vacated.
• Arbitrators, like lawyers, usually get to bill more when their cases drag on (although they can be subjected to pressure from arbitration providers, and from the parties, to hold down their bills).
• An arbitrator’s ability to get hired for future cases can be affected by the recommendations of the parties’ counsel. The arbitrator will thus be motivated to try to avoid disappointing or angering either side’s counsel. See Stipanowich, supra, at 13.
• The arbitrator therefore will be inclined to grant counsels’ requests for more discovery, more time, and more admission of evidence into the record; the arbitrator likewise will be disinclined to enforce time limits or to grant motions for summary judgment or other early disposition. See id. at 15. This, despite the arbitrator’s duty, under typical arbitration rules, to expedite the case and reduce its cost.
The incremental effect of any given delay or expense is often small. But then the months pass and the bills start mounting up. The parties and their counsel start to blame the arbitration process—even though the delay and expense are largely of their own making.
The provisions of the case plan can help to counteract these incentives and return arbitration to what it was meant to be and often has been—a faster, efficient way of resolving disputes.
Comments and suggestions are welcome.
D. C. Toedt III (the last name is pronounced “Tate”; the initials stand for Dell Charles) is a member of the Texas and California bars and of the AAA’s commercial arbitration panel; he arbitrates disputes about technology license agreements and other intellectual-property matters. Earlier in his career he was a partner and member of the management committee of Arnold, White & Durkee, a 150-lawyer national intellectual-property litigation boutique, where he chaired an ABA section’s special committee that developed a series of case plans based largely on the Manual for Complex Litigation. He is at dc@toedt.com; see also www.OnContracts.com/about. Maretta Comfort Toedt, a member of the Texas and Pennsylvania bars, has been a labor and employment arbitrator for more than 20 years, with previous practice experience in a Fortune 15 corporation and then in a BigLaw firm. She is board-certified in labor and employment law in Texas and is a member of the board of governors of the National Academy of Arbitrators. She is at maretta@toedt.com; see also www.LinkedIn.com/in/marettatoedt. The authors, who are husband and wife, are based in Houston. They wish to thank their long-time friend John Burritt McArthur, J.D., Ph.D., a California arbitrator, for his comments on an earlier draft of this article; any errors or idiocies are of course theirs.
ABC Inc. v. XYZ Corporation
Arbitration Scheduling Order 1
(annotated)
Case number: 123-4567-89. Date of this Plan: January 1, 20xx. Arbitrator: Jane Doe, duly appointed in accordance with the parties’ agreement. Case Administrator: Richard Roe of the American Arbitration Association.
Table of Contents
1.Introduction 1
2.Highlights of the Scheduling Order 2
2.1The Chronology helps everyone focus on the “strike zone” 2
2.2Direct testimony is mainly by written witness statement 4
2.3Mini-trial conference call with senior management after initial written disclosures 6
2.4Discovery is carefully managed 6
2.5Motions are fast-tracked, and mainly done by email 6
2.6The hearing and award are expedited 7
2.7Major modifications must be approved by parties, not just counsel 7
3.The goal of the Scheduling Order is to offset the cost-increasing incentives of arbitration 8
1Administration 3
3.1Definitions 3
3.2Only the parties themselves can agree to override this Scheduling Order 4
3.3Ex parte communications with the arbitrator are prohibited 5
3.4Confidentiality is required 6
3.5Case-management calls will take place: Weeks 6 and 10, Tuesday, 11:00 a.m. 6
3.6Stipulations are strongly encouraged (and have limited effect) 7
3.7Motion practice is to be expedited 8
3.8Documents and exhibits are to have consistent numbering 10
3.9Exhibits will be admitted if not timely objected to 11
3.10Exhibits may be streamlined 11
3.11The arbitrator’s notes and files are not available 12
4.Early initial disclosures 12
4.1Background: Early disclosures are required to reduce overall costs 12
4.2Chronology draft exchange begins: Tuesday of Week 2 13
4.3The arbitrator may offer observations and questions 16
4.4Written witness statements, excerpted from the Chronology, are required (delete if so agreed by the parties) 18
4.5Appendix: Suggested disclosures for breach-of-contract disputes 20
5.Non-binding mini-trial to senior management after initial disclosures 22
5.1The non-binding mini-trial conference call is scheduled for: Thursday of Week 6 22
6.Discovery procedures 23
6.1Document production may be requested during: Weeks 1 through 7 23
6.2Voluntary telephone interviews may be conducted during: Weeks 1 through 7 25
6.3Approved depositions may be conducted during Weeks X through Y 27
6.4Subpoenas must state the applicable legal authority 28
7.The hearing 29
7.1The hearing will begin: Tuesday of Week 12 29
7.2A short recess may be taken after opening statements (if any) 29
7.3Live witness testimony is to be expedited 30
7.4Each party must prove its claims and defenses 31
7.5The arbitrator may make a partial award on partial findings 33
7.6A draft award will likely be circulated for comment 33
7.7Specified disputes will be decided by “baseball arbitration” (delete if not agreed) 35
7.8The arbitrator will retain jurisdiction for clarification or remand (delete if not agreed) 36
8.Post-award matters 36
8.1The final award may be appealed within the AAA (delete if not agreed) 36
8.2The final award may be partially retried in court (delete if not agreed) 37
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