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Arbitration streamlining

This post provides additional annotations and commentary for the Common Draft arbitration-streamlining clause.

Why expressly authorize arbitration streamlining

It can sometimes be very useful for an arbitration agreement to explicitly encourage arbitrators to streamline the proceedings, because otherwise their inclination might be to go along with requests by the parties’ counsel for (expensive) discovery, motion practice, etc.

Arbitration proceedings can sometimes get bogged down in litigation-like rabbit trails. That can happen in part because attorneys (and arbitrators who are attorneys) are comfortable with familiar rules of civil procedure, and because arbitrators, desiring repeat business, can be reluctant to hold counsel’s feet to the fire. See generally, e.g., Thomas J. Stipanowich, Arbitration: The New Litigation, 2010 Ill. L. Rev. 1. It therefore can be helpful for an arbitration agreement to expressly encourage the Arbitral Tribunal to streamline the proceedings.

You might think that such encouragement wouldn’t be necessary, because most arbitration rules already give the tribunal at least some authority to manage the proceedings. See, e.g., Rules R-32 through R-35 of the October 2013 revision of the American Arbitration Association’s Commercial Arbitration Rules.

Any given arbitrator, though, might secretly fear the consequences of taking too muscular an approach to managing the proceedings:

  • The arbitrator might worry, for example, that excessive streamlining of a case could make the award vulnerable to being overturned in subsequent court proceedings: Under the [U.S.] Federal Arbitration Act, for example, one of the few grounds on which a court is allowed to vacate an arbitration award is that “the arbitrators were guilty of misconduct … in refusing to hear evidence pertinent and material to the controversy.” 9 U.S.C. § 10. See Stipanowich, supra, at 12-13.
  • The arbitrator might also worry that streamlining the case will irritate one side or the other, potentially jeopardizing the arbitrator’s chances of getting future business from that side and its lawyers. See id.

For both these reasons, drafting the arbitration agreement to include an express request to “please, please streamline the proceedings” can help overcome any reluctance on the part of the arbitrator to do so.

Motion practice for early disposition of issues

In some disputes, considerable time and money might be saved by employing early-disposition procedures such as those of Rule 12(b)(6) or Rule 56 of the U.S. Federal Rules of Civil Procedure. The Arbitration Rules might expressly allow for such dispositive motions, as is the case with, e.g., Rule R-33 of the AAA’s Commercial Arbitration Rules.

Some arbitrators are reluctant to grant motions to dismiss or for summary judgment. Their concern, generally, is that failing to allow a party to put on whatever evidence the party deemed appropriate could jeopardize the enforceability of the arbitration award under applicable law or the New York Convention.

Other arbitrators take a different view: They reason that contracting parties can be reluctant to agree to arbitration if an expensive, time-consuming, full-blown evidentiary hearing would be required for all issues, with no possibility of early disposition of meritless claims or defenses. See, e.g., Catherine Amifar and Claudio D. Salas, How summary adjudication can promote fairness and efficiency in international arbitration, in the International Bar Association Arbitration Newsletter, Sept. 2010, at 77.

Some general guidelines on early disposition of claims or defenses can be found at the CPR Guidelines on Early Disposition of Issues in Arbitration.

Early deposition scheduling for specific weeks

To help keep costs down, it can be useful to get the parties’ counsel to commit, early on, to taking depositions during specific time periods.

Parkinson’s Law — “work expands to fill the time available” — is alive and well in litigation and arbitration. Counsel usually must juggle a number of cases and other commitments; that can make it hard for counsel to organize an aggressive effort to “get in, get it done, get out.”

Just setting a discovery cutoff date won’t do much to remedy the problem. What can help, though, is encouraging the parties to schedule, near the beginning of the process, specific time periods for taking depositions.

(Hat tip: Houston arbitrator David Waddell, who says he routinely does this in his pre-hearing scheduling orders.)

Representative depositions

Assuming depositions are even allowed in a given arbitration, it might well make sense for a party to designate a representative to serve as a witness on the party’s behalf. U.S. litigators are quite familiar with this procedure under Rule 30(b)(6) of the Federal Rules of Civil Procedure and its state-law counterparts.

(This is based on a suggestion by a senior litigation partner at the K&L Gates firm; see Stephen J. O’Neil, Managing Depositions in Arbitration to Minimize Cost and Maximize Value, 69 Dispute Resolution J. 15 (2014).)

Direct examination testimony by written statement

An increasing number of courts are conducting bench trials by having each fact witness prepare a written statement of his or her testimony and provide it to the other side in advance (much as expert witnesses have been required to do for years). Then at trial:

  • The witness is sworn; presented with a copy of her written statement; and asked to orally adopt it.
  • The written statement, once orally adopted by the witness, is admitted into evidence, subject to objection as to particular assertions in the same manner as oral testimony.
  • Counsel for the party that called the witness conducts a short oral direct examination, having the witness briefly re-cap her written testimony. This helps the witness to get comfortable with being on the stand.
  • Opposing counsel is given an opportunity to cross-examine the witness about her testimony, both oral and written.

See, e.g., a press release by the U.S. Court of Appeals for the Second Circuit and New York County Lawyers’ Association, First-of-Its-Kind CLE Program on Using Affidavits in Lieu of Direct Testimony at Trial (2011).

Some lawyers object to providing written witness statements in advance because they fear that preparation of the statements will entail extra costs for the client. But:

  • Any competent counsel will spend time preparing the witness to testify anyway; the incremental cost of reducing her assertions to writing should be comparatively little — and the calling lawyer gets to craft exactly what the witness will “say” on direct examination and needn’t worry that she will get it wrong on the stand.
  • The witness can relax about getting her direct testimony “right,” because it is written down in advance; the written statement can even serve as a cheat sheet that she can consult if she wishes.

Other lawyers object to preparing witness statements because it supposedly gives opposing counsel a road map for cross-examination. But a competent and thorough pre-trial deposition of the witness by opposing counsel will do much the same thing — at greater cost for all concerned.

Many courts in the U.S. are turning to the use of written witness statements. For example;

• In the famous e-book pricing conspiracy trial of U.S. v. Apple, federal district judge Denise Cote directed that witness testimony on direct examination be taken mainly by affidavit. See United States v. Apple, Inc., No. 12 CIV 2826, slip op. at 5-6 & n.2,(S.D.N.Y. July 10, 2013) (Cote, J.), affirmed, Nos. 13-3741-cv etc. (2d Cir. June 30, 2015).

• The U.S. Federal Judicial Center has published Sample Form 49, a model order setting out procedures for direct testimony by written statement, based on an order used by then-Chief Judge Vaughn Walker of the Northern District of California.

• Similar practices are followed by some other U.S. federal district judges, including, for example, Colleen McMahon of the Southern District of New York; Thomas C. Platt of the Eastern District of New York; and Douglas P. Woodlock of the District of Massachusetts. See, e.g., Individual Practices and Procedures, Judge Colleen McMahon (Dec. 20, 2012); Individual Practices of Judge Thomas C. Platt, at 8 (Dec. 18, 2002); Order Regulating Non-Jury Civil Trial, part III.2 (Woodlock, J.).

The use of written statements for direct-examination testimony is said to be a common practice in commercial cases in England and Scotland. See generally The use of signed witness statements or affidavits in commercial actions (March 2012).

Examining multiple witnesses at once

Apparently it’s not uncommon in Australian courts to have expert witnesses testify together in a panel-discussion format, known colloquially as “hot-tubbing” the witnesses; this reportedly results in dramatic time savings. See, e.g.:

One Australian commentator says, “It is remarkable how the demeanour of some expert witnesses will change when sitting alongside their opposite number and answering questions from the tribunal rather than the advocate on the other side.” Lionel Persey QC, Effective Case Management at 4 (undated).

In an appropriate case, a similar procedure might save time and trouble even for fact witnesses, especially if their credibility is not in issue. (In some cases, of course, the Arbitral Tribunal might have to actively manage the proceeding to maintain civility among opposing witnesses.)

Summary exhibits

See generally Fed. R. Evid. 611(a) (trial judge should exercise reasonable control over order and mode of presenting evidence), 1006 (summaries).

Chess clock

Chess-clock procedures are not uncommon in international arbitration. See Albert A. Monichino, Stop Clock Hearing Procedures in Arbitration (2009). One British commentator observes:

The chess-clock procedure is increasingly used in arbitrations. In my view its use should be the rule rather than the exception. It encourages the parties and their advocates to focus on the real issues in the case.

We all know from experience that most cases turn on very few key points at the end of the day and that much of the evidence that is adduced proves to be completely irrelevant to the outcome. …

Absent any bombshells, there should be no excuse for hearings overrunning.

Lionel Persey QC, Effective Case Management at 4 (undated).

Tentative or draft award

Having the arbitral tribunal circulate a “draft” award for comments might well be the parties’ only shot at correcting (what they regard as) errors in the draft, because:

  • Under the doctrine of functus officio, once the final award is issued, the arbitral tribunal will likely have little or no power to alter the award. See, e.g., Bosack v. Soward, 586 F.3d 1096, 1103 (9th Cir. 2009) (functus officio doctrine “forbids an arbitrator to redetermine an issue which he has already decided”) (internal quotation marks and citation omitted).
  • And in many jurisdictions, a party disappointed with the final award will have only limited grounds for appeal. See, e.g., Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396 (2008), in which the Supreme Court of the United States ruled that an appeal of an award rendered under the Federal Arbitration Act could be appealed only on the grounds stated in 9 U.S.C. § 10.

The Eighth and Ninth Circuits have held that awards not expressly stated to be final are not subject to functus officio. See Bosack v. Soward, 586 F.3d at 1103 (citing and following Eighth Circuit decision).

Some state courts in California routinely issue tentative rulings on motions. That gives the court the opportunity to fine-tune the ruling, based on input from the parties. See, e.g., Superior Court of California, Alameda County, Tentative Rulings.

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