Ralph O. Williams III

Arbitration Tips

• Arbitrator Selection – Minimum Due Diligence
• Use a Supplemental Disclosure Questionnaire
• Arbitrator Disqualification Can Not be Waived
• Use CCP 638(a) to Insure Trial and Appellate Court Review
• Request a Reasoned, Interim Arbitration Award
• Master the “Arts & Crafts”
• More “Arts & Crafts”
• High – Low Agreements
• Baseball Arbitration
• Arbitrator Selection - Strike and RankProcedure
• Reverse the Process
• Remedy for Unpaid Arbitration Fees
• Make a Record

Arbitrator Selection – Minimum Due Diligence

1. Profile the type of arbitrator you need / want, i.e. strong on law, subject matter experience, sense of equity, work ethic. 
2. After selecting a short list of proposed arbitrators, insist that each proposed arbitrator make complete disclosure pursuant to CCP 1281.9 which incorporates CCP 170.1 (disclosures for judges) and California Rules of Court – Division VI (ethics for arbitrators). 
3. Be sure the disclosure includes mediations/discovery references (both past and future) with the parties, counsel and law firms and a statement as to whether or not the proposed arbitrator will accept or decline new ADR work from the parties, counsel or law firm while the arbitration is pending.
4. Check databases maintained by professional organizations and law firms and email your colleagues for real time comments and evaluations of the proposed arbitrators.

Top

Use a Supplemental Disclosure Questionnaire

Pursuant to CCP 1281.9(a) a proposed arbitrator is required to disclose “all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial.”  The problem when selecting an arbitrator is how to discover such matters and facts.

Consider using a supplemental disclosure questionnaire, similar to a short form jury questionnaire, inquiring into the arbitrator’s personal background and experiences with the type of dispute at hand.  Ideally, the supplemental questionnaire would be developed jointly by opposing counsel.  Failing that, serve your questionnaire on the proposed arbitrator and the other side.  If the arbitrator fails to or refuses to answer the questionnaire, disqualify the arbitrator for failing to make disclosure under CCP 1281.9.

Top

Arbitrator Disqualification Can Not be Waived

A party’s right to disqualify an arbitrator can not be waived.  In Azteca Construcion v. ADR Consulting the Third District Court of Appeal held that an arbitration agreement calling for American Arbitration Association (AAA) rules, making the AAA the final authority on arbitrator qualification, must yield to the arbitrator disqualification provisions of CCP 1281 et. seq.

An arbitrator must make disclosures pursuant to CCP 1281.9 within 10 days of appointment.  Any party may disqualify a neutral arbitrator within 15 days of the arbitrator’s disclosure (CCP 1281.91).  The right to disqualify is absolute, may be exercised without cause and an unlimited number of neutral arbitrators may be disqualified.

Azteca Construcion v. ADR Consulting, C045316, 2004 DJDAR 10648 (August 25, 2004)

Full text link in Word format: http://www.courtinfo.ca.gov/opinions/documents/C045316.DOC

Azteca Construcion v. ADR Consulting, C045316, 2004 DJDAR 10648 (August 25, 2004)

Full text link in PDF format: http://www.courtinfo.ca.gov/opinions/documents/C045316.PDF

Top

Use CCP 638(a) to Insure Trial and Appellate Court Review

You and your opponent agree to arbitrate a litigated dispute and both are concerned about the lack of judicial review and the limited review standard on appeal.

Rather than dismissing the case or having the trial judge order the matter to arbitration, prepare an Order to Agreed Reference pursuant to CCP 638(a).  Your neutral is now a referee, who after conducting the hearing(s) prepares a report and recommendation to the trial judge.  Each side has the opportunity to object to the report and/or recommendations, conduct hearings on the objections and the losing party has full appellate rights.

Top

Request a Reasoned, Interim Arbitration Award

The chances of modifying a binding arbitration award are somewhere between “slim and none”.  The review grounds set out in CCP 1286.2 (Vacation of Award) and CCP 1286.6 (Correction of Award) are very narrow and there are no post award proceedings because the arbitrator loses jurisdiction upon signing of the award.  Requesting a reasoned, interim award creates the opportunity for post-award hearings.

A reasoned award sets out the arbitrator’s factual and legal rationale for the award.  An interim award preserves the arbitrator’s jurisdiction while post arbitration matters are considered.  Most arbitrators will honor the parties’ joint request for a reasoned, interim award.

After an interim award is rendered, the parties know who the prevailing party is and can structure the appropriate request for attorney fees, if allowed by contract or statute.  The interim, reasoned award gives counsel the chance to comment on the award, either formally or informally, bringing to the arbitrator’s attention correctable errors of fact, law or reasoning.

Top

Master the “Arts & Crafts”

“Arts & Crafts” refers to your case’s presentation details.  Attention to the look and feel of the presentation adds to its persuasive quality.  Below are 5 “arts & crafts” tips.

1. When assembling document notebooks, place the documents in advocacy order i.e. put what’s most important to telling your story first. 
2. Make a “hot docs” notebook for the arbitrator.  Usually, only about 10% of the documents are significant.  Make those documents easy to find.
3. If there are 2 versions of the same document, place them behind the same tab, marking your version “A” and the other behind it “B”. 
4. Use 3 inch, “D-ring” binders for documents.  Thicker binders are difficult to handle.  “D-rings” keep the pages flat and neat. 
5. Use an oversize hole-punch, making the pages in your binders easier to turn.

Top

More “Arts & Crafts”

1. Have enough copies, organized in folders and in presentation order.
2. Highlight quoted text in the base document or deposition.
3. Have an 8½ x 11 version of every blowup in the exhibit books. 
4. Learn to run the ELMO, Power Point and/or other electronic presentation systems before the arbitration.  Set up early and practice in the hearing room.
5. Check your office supply kit: easels, flip-chart paper, markers, erasers, Post-its and favorite/lucky pens.

Top

High – Low Agreements

High – Low Agreements, also known as “Mini – Maxi” agreements are used to limit or bracket arbitration awards and jury verdicts.  They can be made at any time before the award/verdict is rendered.  Below we discuss the mechanics of a high – low agreement as it usually occurs in an arbitration.

Prior to commencing the arbitration, the plaintiff agrees to limit its recovery ($500,000).  In consideration the defendant agrees to pay a sum certain ($100,000).  If the award ($700,000) is more than the high, it is reduced to the high number ($500,000).  If the award ($20,000 or a defense verdict) is less than the low, the award is increased to the low number ($100,000).  If the award falls between the two numbers ($350,000) that number is the award.

When implementing a high – low agreement, consider whether to tell the arbitrator its parameters.  Generally, if the arbitrator knows the parameters of a high – low agreement, you will get a result between the numbers.  Therefore, if you are the defendant with the chance at a defense verdict or the plaintiff with the chance of a homerun, you probably do not want to disclose the high – low agreement’s numbers.

When using a high – low agreement in an arbitration, where the arbitrator does not know its parameters, request an interim award, because the arbitrator loses jurisdiction on signing the award, except for limited grounds to correct.  After receiving the interim award, reveal the high – low agreement’s parameters and have the arbitrator enter the final award in accordance with the agreement.

When using a high – low agreement in a bench or jury trial, it is best practice to let the trial judge know the existence of the agreement without revealing its parameters, so as to avoid the perception that you are manipulating the court and/or wasting judicial resources.

Top

Baseball Arbitration

Baseball arbitration is named after the process by which major league baseball players resolve salary disputes with the owners. Here’s how it works in the litigation world. The parties negotiate to their last and best offers, agreeing to submit their dispute to a neutral arbitrator. After hearing the evidence, the arbitrator must pick either the plaintiff’s or the defendant’s final number.

Baseball arbitration levies a heavy penalty on an unreasonable party because the arbitrator’s tentative decision gravitates toward the reasonable party’s number. This demand for reasonable negotiating behavior has the happy side effect of settling disputes. As the parties try to set their respective reasonable number that will most appeal to the arbitrator, they close the gap and settle.

Day baseball or night baseball? In “day” baseball arbitration, the arbitrator is told the parties’ final numbers before evidence is introduced. This fosters a subtle anchoring effect where the arbitrator filters the evidence and uses it to test the parties’ numbers, rather than exercising independent judgment. In “night” baseball arbitration the arbitrator hears the evidence and renders an interim award. Then the parties’ numbers are revealed and the final award is made at the party’s number closest to the interim award.

Top

Arbitrator Selection - Strike and Rank Procedure

The strike and rank procedure is the almost universal method for arbitrator selection absent the parties' agreement. Here's how it works in a two-sided case.

1. Generate a list of 10 potential arbitrators. The list comes from a recognized ADR provider, who conducts the process or each side contributes 5 names and designates a neutral party to manage the process.

10 Potential Arbitrators
Adams	Frank
Baker	George
Charles	Harris
Davis	Ingram
Edwards	Jones

2. Each side simultaneously strikes 3 names and ranks the remaining 7 names in preference order, 1 through 7.
    

Plaintiff’s List	Defendant’s List
Baker	Charles
Edwards	Frank
Ingram	Ingram
1 Charles	1 Baker
2 Frank	2 Adams
3 Davis	3 Davis
4 George	4 Jones
5 Adams	5 George
6 Harris	6 Harris
7 Jones	7 Edwards

3. The preference lists are combined and the candidate with the highest preference, i.e. the lowest combined ranking total, is appointed the arbitrator, subject to the disclosure rules.
    

Available Arbitrators		Stricken Arbitrators
Davis      (3+3=6)		Baker
Adams    (5+2=7)		Charles
George   (4+5=9)		Edwards
Jones     (7+4=11)		Frank
Harris     (6+6=12)		Ingram

4. If the appointed arbitrator does not make it through the disclosure process or declines to serve, the next candidate of the list is appointed, subject again to the disclosure rules.

Top

Reverse the Process

With the growing court backlog, binding mediation, also known as mediation-arbitration or "med-arb", is making a comeback. In med-arb the case is mediated; if impasse occurs, the process becomes an arbitration and the former mediator, now an arbitrator, renders an award.

Med-arb proponents argue that it conserves resources, only one hearing, and closes the case with an award from a person familiar with the parties and issues. Critics note that med-arb is a suspect process because the parties and counsel cannot know if confidential mediation communication influenced the award.

The solution is, reverse the process, arb-med. Arbitrate the case first and then mediate it. Here's how it works.

     1. Pre-Arbitration Conference. After the parties select the neutral, they hold a pre-hearing conference where they agree on how to arbitrate the case in a half day using declarations, reports and limited cross-examination.

     2. Award Form. The parties and neutral prepare an award form that only requires the amount be filled in. If a defense award, the number is zero.

     3. Arbitration. Conduct the arbitration. The neutral reads, hears and considers the evidence and argument, completes the award, seals it and gives it to an ADR administrator for safe keeping.

     4. Mediation. Conduct the mediation. If the case settles, the award is shredded without disclosure.

     5. Impasse Breaker. If the mediation results in impasse, the award is retrieved, opened and served.

Because both the above processes are arbitrations, insist on all required arbitration disclosures prior to the neutral's final selection. ADR Services requires that parties wishing to engage in an arbitration-mediation process execute a Stipulation setting out the risks of med-arb.

Top

Remedy for Unpaid Arbitration Fees

In Tillman v. Rheingold Firm, et al., the Ninth Circuit held that a legal malpractice plaintiff who could not pay her arbitration fees would be allowed to continue her action against the law firm in district court.

Query: Will there be a similar result in California under CCP 1280 et. seq.? Or under different arbitration rules? Or will the courts fashion an Armendariz like remedy where the defense must pay the arbitration fees?

Takeaway: Under the Federal Arbitration Act, when the plaintiff can't pay the arbitration fees, the defense will have to decide which forum, arbitration or court, they prefer and act accordingly.

Tillman Case Summary: Renee Tillman retained the Rheingold firm to sue for the wrongful death of her husband, Tim in a trucking accident. There was an $8 million jury verdict that was reversed on appeal and settled. Tim's son, Sean, sued the Rheingold firm and Renee for omitting him from the wrongful death lawsuit. Renee sued the Rheingold Firm for legal malpractice.

Pursuant to an arbitration provision in the retainer agreement, her case was stayed and ordered to arbitration with the American Arbitration Association. Renee was unable to pay an $18,563.50 deposit and the Rheingold Firm declined the option to pay it. After refusing to rule on a motion for interim relief until the deposit was paid, the Arbitrator terminated the arbitration due to the missing funds.

The California Central District Court lifted the stay and granted a motion to dismiss ruling that "the Federal Arbitration Act (FAA) deprived the district court of authority to hear 'the claims that would have been subject to the arbitration agreement,' and dismissal was required."

The Ninth Circuit Court of Appeals reversed, holding that the arbitration "has been had in accordance with the terms of the [arbitration] agreement," satisfying the FAA. The matter was remanded for trial in district court.

Read more: Tillman v. Rheingold, Valet, Rheingold, Shkolnik & McCartney, 825 Fed 3rd 1069 (9th Cir., June 15, 2016).

MCLE Opportunity: Advanced Mediation Conference, sponsored by the California State Bar, Labor & Employment Section, December 2, 2016. 

Top

Make a Record

As trial dates stretch into an unknown future and judges carry 600+ caseloads, we will see more and more parties and counsel opt to resolve disputes in arbitration. In order to assure a fair and controlled process, a stenographic record is essential. Below are four good reasons to make a record.

1. It moderates and regulates process. Stated simply, everyone “stays inside the lines."

2. When an arbitration carries over to two or more sessions, the arbitrator, counsel and parties have the means to refresh recollection and bring continuity to the process.

3. Transcripts are available to prepare closing briefs and quote testimony.

4. A record facilitates court and appellate review.

The value of a record is directly proportional to the mischief prevented. If the case is important enough to conduct a four or more day arbitration, it is important enough to make a record.