As of September 2017, Steven Schwartz merged his firm, Steven H. Schwartz & Associates, P.L.C. with Keller Thoma, P.C. and became a partner in that firm.  Mr. Schwartz continues his practice as an employment and labor relations attorney, and as an arbitrator.  For further information, please go to the Keller Thoma website.

Making Arbitration Work

The takeaway

A detailed arbitration agreement defines the arbitrator’s authority is the best way to ensure a fair, expeditious process.

Benefits of arbitration

In the mid-1990’s, alternative dispute resolution, particularly arbitration, was considered by many plaintiff and defense attorneys to be the answer to costly, lengthy litigation. Courts embraced the concept of arbitration and found ways to encourage parties to submit to arbitration, especially in low dollar claims or in highly technical, complex disputes. Arbitration was promised to be faster, more rational and considerably less expensive than traditional litigation. For the plaintiff, it promised a guarantee of a “day in court” and avoidance of summary disposition. For the defendant, it promised a fair hearing conducted by an experienced, independent attorney, rather than a jury which might be more disposed to rule based on sympathy rather than evidence.

Arbitration drawbacks

Ten years later, has the bloom come off the rose? Many attorneys shy away from arbitration for various reasons. Some arbitration groups charge substantial fees, without regard to the amount of the administrative support required. Some defense lawyers worry that the arbitrator will merely “split the baby”, rather than rule for one side or the other. Other attorneys complain that arbitration is no more expeditious than litigation, citing to experiences where arbitrators required detailed pre-hearing orders that must adhere to the Federal Rules of Civil Procedure, or allowed unbridled discovery or gave consideration to motions for summary disposition based upon technical defenses.

Avoiding arbitration drawbacks: A checklist

These types of problems may be avoided by a comprehensive arbitration agreement which would return arbitration back to its intended objectives. While no means exhaustive, the following is a checklist of issues that plaintiffs and defense attorneys could consider before an arbitrator is selected, or when corporate counsel drafts an agreement with an arbitration clause. If these items are included in the arbitration submission, the arbitrator is bound to follow these requirements and not impose his own sense of “industrial justice”:

  1. Will depositions be allowed? If so, how many?
  2. Will interrogatories be allowed? If so, what is the limit?
  3. How long will discovery be permitted?
  4. What is the penalty if a party is non-compliant during discovery?
  5. How long from the initial filing of the arbitration claim until an arbitrator must issue a decision?
  6. If the arbitrator makes an error of law, does the losing party have the right to appeal?
  7. Will a transcript be required? If so, who pays for the transcript?
  8. Is there a default mechanism if one party does not attend the hearing or file an appearance?
  9. Is there a default mechanism if one party does not pay the arbitrator’s fee?
  10. Is the arbitrator required to write a “reasoned” opinion, describing the rationale for his decision?

Parties can take control of the arbitration process to ensure that it provides a fair, expeditious process. The best way to ensure such a process is to prepare a detailed arbitration agreement that specifically defines the arbitrator’s authority on these matters. By following this approach, attorneys and parties would realize the advantages of arbitration over traditional litigation.