What Business Lawyers Need to Know About Arbitration

Jay M. SpillaneSpillane Trial Group PLC

VLLPDecember 16, 2014

Why do Business Lawyers Need to Know About Arbitration?

• Business lawyers usually choose whether to include arbitration clauses in contracts, and if included draft such clauses.

• Once litigation ensues, the parties and litigation counsel are bound by the drafting choices of the business lawyer.

Advantages of No Arbitration Clause

• Judges don’t charge fees• Full rights of discovery and appeal• More rigor in application of evidence and

procedure, less risk that law will be ignored in favor of general equities

• Improvements in delays in obtaining trial in court

• Less concern than judges are apt to split the baby or favor repeat customers

Advantages of Arbitration

• Arbitration proceeds in a private forum• Avoid potentially emotional or capricious

reaction by jury• Ability to select trier of case• Potentially streamlined procedures (e.g. no or

less discovery)• Potentially quicker resolution• Potentially less expensive overall

Old School arbitration clause

• “Any disputes arising under or related to this agreement will be resolved by binding arbitration before the American Arbitration Association.”

Matters to Address

• Scope of matters submitted to arbitration• Arbitral society to adjudicate claims• Forum and choice of law• Single neutral or panel• Discovery rights• Timing and conduct of hearing• Available remedies• Basis for decision• Appellate rights

Scope of Arbitration

• “Any and all claims, actions or disputes to enforce this Agreement or arising out of or relating to this Agreement or the underlying transactions contemplated by or referenced in this Agreement, whether legal or equitable in nature, whether sounding in contract or tort, including but not limited to claims of fraud in the inducement of this Agreement, must be submitted for binding arbitration administered by . . .”

Arbitral Society

• American Arbitration Association• JAMS• ADR Services• Judicate West• Industry arbitration (FINRA, NYSE)

Forum and Choice of Law

• “The exclusive venue for the arbitration will be Los Angeles County. The arbitration will be decided under California law.”

Single Neutral or Panel

• Default in most societies will be single neutral arbitrator.

• Some industry arbitration rules call for a panel.

Discovery Rights

• “There shall be no rights of discovery except as provided in the applicable arbitration rules.” Ordinarily limited to exchange of documents and disclosure of witnesses; other than injury or death cases depositions may be taken only in exceptional circumstances.

• “In addition, each side will be entitled to take fourteen hours of deposition testimony, divided among up to three witnesses each.”

• “The parties shall have full rights of discovery as set forth in CCP § 1283.05.”

Timing and Conduct of Hearing

• “The hearing will commence within ninety days of demand, and shall not last longer than five days.”

• “The arbitrator shall render a written reasoned award, including findings of fact and conclusions of law, which shall be delivered to the parties within thirty days following the close of the presentation of evidence.”

Available Remedies

• Absent agreement otherwise, applicable law may give arbitrator wide discretion to award remedies including equitable remedies and punitive damages.

• “The arbitrator will lack jurisdiction to award punitive damages. The arbitrator will lack jurisdiction to award equitable remedies except to the extent liability is proven on an equitable claim.”

Basis for Decision

• “The arbitrator shall determine the dispute based solely on the law governing the claims at issue, and not on any other basis such as ‘just cause.’”

Appellate Rights

• Grounds for vacation or correction of arbitration award are very limited.

• “Any award in excess of $50,000.00 shall be subject to appellate arbitration administered by *******, which will proceed before a second neutral arbitrator with appellate experience. The appellate arbitrator shall decide the appeal by applying the standards of review that would govern civil appeals in California. The appellate arbitrator shall render his/her appellate opinion within thirty days after oral argument. The appellate arbitrator will have authority to award reasonable attorneys’ fees to the prevailing party on appeal.”

Extra Credit

• Limitations on conduct and remedies in consumer litigation.

• Ability to compel arbitration of class claims (AT&T v. Concepcion; Iskanian v. CLS Transportation)

Iskanian Class Procedures Language

“Except as otherwise required under applicable law, (1) EMPLOYEE and COMPANY expressly intend and agree that class action and representative action procedures shall not be asserted, nor will they apply, in any arbitration pursuant to this Policy/Agreement; (2) EMPLOYEE and COMPANY agree that each will not assert class action or representative action claims against the other in arbitration or otherwise; and (3) each of EMPLOYEE and COMPANY shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person.”