Provisions for an Arbitration Scheduling Order to Get to a Hearing in 12 Weeks, Adapted from the Manual for Complex Litigation, [draft]

DRAFT 2014-12-23

Provisions for an Arbitration Scheduling Order
to Get to a Hearing in 12 Weeks, Adapted from
the Manual for Complex Litigation, [DRAFT]

D. C. Toedt III and Maretta Comfort Toedt

(Our last name is pronounced “Tate”)

1. Introduction

The title of this article might seem oxymoronic; arbitration and litigation are supposed to be different—aren’t they? And complex litigation sounds even further from arbitration. Yet the Federal Judicial Center’s Manual for Complex Litigation (“MCL”), now in its fourth edition (2004), offers numerous practical suggestions for streamlining non-jury cases, distilled from decades of trial judges’ hands-on experience.

Unfortunately, the MCL seems to leave the drafting of an actual scheduling order as an exercise for the reader. This article therefore proposes a set of model provisions, based mainly on the MCL, that could help arbitrators to get many cases, even complex ones, to a hearing in as little as 12 weeks—with “good enough” discovery and dispositive-motion practice, and with less overall expense. Arbitrators typically have authority under relevant arbitration rules to adopt such provisions (many of which are explicitly suggested in arbitration rules).

2. Overview of the scheduling-order provisions

The scheduling order below addresses the following; it’s set up to make it easy for arbitrators to pick and choose which provisions to use and which to omit.

• Disclosures modeled in part on Rule 26 of the Federal Rules of Civil Procedure, which has been refined over the years to help speed up federal-court litigation, and MCL 11.13. This approach is explicitly contemplated in, for example, Rules R‑22 and P‑2 of the American Arbitration Association’s Commercial Arbitration Rules (2013).

• Early questioning by the arbitrator, per MCL 11.11 and 11.33, about the parties’ claims and defenses to identify disputed material facts that counsel intend to prove and how they intend to prove them. Such questioning should help to identify points for possible stipulation, discovery, dispositive motions, and hearing preparation, and reduce the cost of all of the above.

•  “Discovery lite” in the form of the following:

• 
  Voluntary, informal, telephonic 30-minute interviews of adverse-party personnel to help identify points that could be stipulated as well as documents of interest. Such interviews can utilize (1) written questions for more-effective use of time, as well as (2) “conference” interviews of multiple individuals at once.
  
• 
  Limited requests for production of documents that were not provided in the initial disclosures—subject to approval by the arbitrator. Quick responses are required to keep the process moving; and
  
• 
  Formal depositions only in exceptional cases for good reason with arbitrator approval, even if counsel agree to them.
  

• If warranted by the complexity of the case, submission by each party of a written statement of fact and evidence, in accordance with MCL 11.31, 11.33, and 11.641. The statement of fact and evidence will be familiar to fans of Professor James McElhaney, because it’s much like the proof checklist that he urges trial counsel to develop. See, e.g., James W. McElhaney, The Trial Notebook 128-29 (ABA 2005), excerpt available at http://goo.gl/LHwX6U (books.google.com).

• Dispositive-motion proposals are encouraged, but can be filed only with the arbitrator’s approval.

• Modification of dates or limitations, in most cases, only with approval of the parties’ in‑house representatives—this gives all participants an incentive to keep the case moving.

• Direct testimony at the hearing by written statement, together with oral cross-examination if timely requested. Written witness statements are increasingly used in federal courts’ non-jury trials, because they can significantly reduce the time needed for testimony and eliminate much of the need for depositions. (Hostile witnesses who refuse to provide a written witness statement may be presented in the traditional way.)

•  “Baseball”-style arbitration of damages claims and other numerical-type disputes, when agreed by the parties: 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.

• Circulation of 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.

• Appeal to a separate appellate arbitration panel under the AAA’s appellate rules, if so agreed by the parties at the outset of the case.

•  Partial retrial of the case in court, also if so agreed at the outset of the case—but with significant incentives for accepting the award, modeled on similar statutory regimes.

3. Incentives

Arbitrators should consider using some of all of these scheduling-order provisions to help neutralize the subtle incentives that can contribute to delay and expense of the arbitration process. Those incentives are largely responsible for arbitration being considered by some to have all the cost and delay associated with litigation, but with little or no right to appeal from an adverse decision. See generally, e.g., Thomas J. Stip­an­o­wich, Arbitration: The New Litigation, 2010 Ill. L. Rev. 1.

(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 scheduling order below 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.
Dell Charles “D. C.” Toedt III (the last name is pronounced “Tate”) 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 a 150-lawyer national intellectual-property litigation boutique, where he chaired an ABA section’s special committee that developed a series of case-management orders 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 has been nominated to become a member of the board of governors of the National Academy of Arbitrators in May 2015. 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 a draft of this article; any errors or idiocies are of course theirs.

1.Introduction 1

2.Overview of the scheduling-order provisions 1

3.Incentives 3

1Administration 9

3.1Definitions 9

3.2Modifications and waivers of this Order 11

3.3Communications with arbitrator 12

3.4Confidentiality 13

3.5Questioning of counsel by the arbitrator 13

3.6Document numbering 15

3.7Exhibits—numbering, etc. 16

3.8Motion practice 17

4.Pre-hearing preparation 19

4.1Stipulations—in general 19

4.2Case-management calls—Weeks 6 and 9, Tuesday, 11:00 a.m. 20

4.3Document production may be requested during: Weeks 1 through 4 21

4.4Telephonic interviews may be conducted during: Weeks 1 through 7 23

4.5Disclosures are due: Tuesday of Week 4 25

4.6Written witness statements for direct testimony are due: Tuesday of Week 5 27

4.7Statements of fact and evidence are due: Tuesday of Week 6 31

4.8Updates to disclosures, etc., are due: Thursday of Week 8 33

4.9Depositions only with arbitrator’s approval 34

4.10Subpoenas 35

4.11Mediation is scheduled for: Thursday of Week 9 36

5.The hearing will begin: Tuesday of Week 12 36

5.1Hearing schedule 36

5.2Short recess after opening statements to discuss possible settlement 37

5.3Witness testimony 37

5.4Bench briefs 39

6.Post-hearing matters 39

6.1The award 39

6.2Baseball arbitration of specified disputes (delete if not agreed) 40

7.Post-award matters 41

7.1Retention of jurisdiction for clarification of award 41

7.2Appeal to AAA appellate arbitration panel (delete if not agreed) 42

7.3Partial retrial in court (delete if not agreed) 42