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On Demand 1h 2m 10s

Arbitration vs. Court: What are the Differences, Benefits and Drawbacks?

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Arbitration vs. Court: What are the Differences, Benefits and Drawbacks?

This webinar lays out the elements of arbitration and compares the major provisions between court proceedings and the arbitration process. The regular people on the street often believe that court proceedings provide them with their day in court. However, arbitration may provide an easier and less expensive process to vindicate their rights and receive a decision. The arbitration process has evolved in the last twenty years to ensure that parties with disputes are provided due process rights but has this made the process litigation light? The benefits and drawbacks between court proceedings and arbitration will be discussed at length.

Transcript

- [Deborah] Hi, my name is Deborah Masucci. I'm an independent arbitrator and mediator and a member of the adjunct faculty at Fordham Law School. For the last four years, I've coached student teams in arbitration competitions. My focus is to provide the skills to new lawyers on how to effectively advocate in an arbitration setting. This presentation gives you insight about the differences between an arbitration proceeding and court. This topic is near and dear to me. Because through my career, I held several senior positions where the arbitration process was at a pivotal stage. I led the arbitration program at FINRA in the '80s and '90s when the US Supreme Court issued their seminal cases enforcing pre-dispute arbitration clauses in the securities industry. This actually went over into all commercial arbitration, and then consumer and other types of arbitration. I then went to JAMS where the dispute resolution provider was rebranding itself. Toward the end of my tenure, JAMS established its arbitration practice. My final corporate position was at AIG, where I led an ADR discipline and saw firsthand internally the many uses of arbitration, and the likes and dislikes from a user perspective. Understanding these differences is important because of the increase in the use of pre-dispute arbitration agreements to resolve consumer and business disputes. It may also be surprising to you. But even if you file an action in court, you may end up in a court and next arbitration program, and federal or state court. So let's start and learn about the differences and the processes. The agenda will first introduce the characteristics of each process, then discuss the major milestones for each procedure and how the processes are the same or different. You will learn how to get to arbitration through a pre-dispute arbitration clause, and what should be included in the clause to ensure enforceability and clarity for the process. Many disputants say they want their day in court and not proceed in arbitration. These individuals think that arbitration is imperfect justice. However, we will go through the major milestones to see what you would expect in court versus arbitration. There are trade offs, and we will discuss what those trade offs are. And you will see from this agenda that we're gonna talk about the major areas of due process, confidentiality, and privacy. You know, sometimes people think when they're in court that they'll get more discovery, or that motion practice will really lend itself to their type of case. This doesn't always happen. And you know, you'd be surprised. Sometimes you might end up better off in arbitration. So what can you expect when you initiate a legal proceeding in court? We start with the fact that anyone can file a court action against another person or business. They should have a legal basis for the lawsuit, and they should be able to explain the harm caused by the defendant. But a complainant solely needs to describe the harm and the remedy sought. Court fees required to initiate a proceeding are low. So there's not a financial burden to initiating the proceeding. One important aspect of our judiciary system is that all court proceedings are public. It's more difficult today to secure a seat in court because of COVID protocols and security. But in reality, you can just walk into court any time and watch a proceeding. So what are the other aspects? You know, you don't really get to pick your judge. A trial judge is assigned to each case on a rotating basis. So you could find out after the judge is assigned to you what his or her previous decisions look like, or what, you know, their inclinations are, but you get no choice and who that trial judge is. The judge himself or herself is limited to grant relief only authorized by statute or under common law. Again, a big difference in arbitration. Arbitrators can issue awards that are equitable. But judges are limited to the relief that is authorized by common law or by statute. Also, may take a lot longer to resolve the case in court, because of motion practice, broad discovery that is allowed. And the case may not be finished when the judge renders a decision, because there's a substantive right of appeal. The other aspect that's not mentioned here, but needs to be raised is that close to 98% of cases never get to trial. In fact, 98% of the cases are resolved or abandoned before it gets to trial. So that, you know, desire to want your day in court really may not be what happens for most people. On the other hand, what are the arbitration characteristics? The way you get into arbitration is that you are subject to a pre or post-dispute resolution agreement. And when I say pre or post, it could be before dispute arises, or after a dispute arises, the parties may agree that they will arbitrate their dispute rather than proceeding in court. And they may want to do that for a myriad of reasons. And I'll discuss that in a minute. The parties in arbitration do have to pay additional fees. ADR providers, where most of arbitration occurs, have administrative fees that they levy to the parties. Some of it is based on the complexity of the case or the amount in controversy. And in addition, arbitrators have fees themselves. The parties will be liable for the arbitrator fees. So arguably, the administrative and arbitrator fees make the process more expensive than going to court, at least in the beginning stages. Another aspect of arbitration that people sometimes overlook is that it's a private proceeding. The only people that who are permitted in the arbitration hearing room are the arbitrators, the parties themselves, and witnesses for the time that they're gonna be testifying. There is no court reporter who sits there and races to the newspaper with information about what's happening in court. They're generally very private proceedings. The fourth aspect is that, you know, arbitrators are selected by the parties. In general, you get the names and background information of individuals who you should consider to be appointed to your case. Those individuals will describe what their background is, and their experience and training in the arbitration process. The parties generally have the requirement or the availabilities to strike people who are not acceptable and then rank the remaining individuals. Once that list is developed, it goes to the administrator, and the administrator then compares both of those lists received between the parties and comes up with the final names of the arbitrators. Arbitrators also are required to provide disclosure information. That's information or context that they may have with the party's counsel or co-arbitrators. That information is important to maintain the fairness of the proceeding and to ensure the impartiality of the arbitrators, as well as to give the parties an opportunity to object to the arbitrator if the disclosure is, you know, something that the party believes will render that individual biased. So it's an important process in the arbitration proceeding that you do not find in court. Remember, I said earlier that judges are required to render remedies that are provided by law or statute. However, arbitrators are required to consider the law but they can apply equity. They can balance the equitable positions of both parties and make a decision that may be outside the statute. And that's a very important distinction between arbitration and the courts. Many people want to arbitrate because it's a speedy process. There's limited motion practice. And in fact, most of the rules limit the number of times that a party can file a motion to dismiss. And under some of the rules, in order to be granted a right to file a motion to dismiss, the party must show the likelihood of succeeding. In addition, discovery is limited. It really has to be relevant to the case itself. You can't go on that proverbial fishing expedition. And finally, an arbitration decision is traditionally final and binding. But later on in the presentation, I will talk about some areas where there is an erosion of the final and binding aspects of arbitration. You know, we can't really talk about arbitration or court without talking about mediation too. Even the most experienced lawyer can be caught poorly explaining the difference between arbitration and mediation, or they may even use the processes interchangeably. Today, most young lawyers will have taken an ADR class in law school. But for the few who are still in the dark, I thought it would be good to explain some of the primary differences between arbitration and mediation, because of the prevalence of court-annexed arbitration and mediation programs, as well as the push by the judiciary for disputing parties to attempt private mediation. Both arbitration and mediation are private processes. Again, unlike court, you can't just walk in and sit in the proceeding. So it still has that private confidentiality aspect. Arbitration, however, is a more relaxed structured court proceeding. Whereas mediation is a facilitated negotiation, where the mediator uses evaluative and facilitative techniques to help the parties come to the resolution. Now, what's the difference between evaluative and facilitative techniques? In evaluative techniques in mediation, what the mediator is doing is assessing the strengths and weaknesses of each case based on the law, based on current precedent, and based on the strengths of what the parties tell them. A facilitative technique is one where there's no assessment of the strengths and weaknesses. But the mediator is really just making sure both parties understand each other's positions, and move back and forth to improve communications between the parties. You know, when you look at evaluative, you're coming closer to arbitration. Whereas in facilitative techniques, you're really improving communication between both sides. Another difference between arbitration and mediation is the finality of the two processes. Arbitration can be binding or non-binding, which means that the parties may have to abide by whatever the arbitrator decides. Or the non-binding sense, it becomes more or less a help so that the parties will understand their next negotiation position. Most arbitration though is binding. Meaning that whatever the arbitrator decides, that's how the case will be resolved. Mediation on the other hand, requires voluntary participation, even when a pre-dispute agreement causes the parties to mediate or even when the court orders the parties to mediate. So you know, where in arbitration, once you sign that agreement, you are bound to the process. You have to participate. Mediation, you might have signed an agreement, but your actual participation is voluntary. An arbitrator also makes a decision. That's it. It's either the decision or not, but you have to follow the decision the arbitrator makes. But a mediator can't force the parties to a conclusion. The parties are the only ones with the power to settle the case. The parties on the other hand, they ask the arbitrators to provide what's called a mediator's proposal, but the parties may reject that proposal at any time. It's not binding on the parties. And finally, arbitration is subject to a limited right of appeal. But mediation, the result is a binding settlement agreement. So there are important aspects of both processes that are very different. And that really change the outcome of the process and a party's negotiation positions. Well, what about that arbitrator? The arbitrator is an independent, impartial third party, and he or she is appointed solely as a single arbitrator, or part of a panel of three arbitrators. The arbitrator receives all the information from the parties. An arbitrator is not allowed to do their own investigation. But if an arbitrator does, it's really incumbent on the arbitrator to bring that information into the arbitration hearing room, so that the parties can exemplify or attack it and expand on it from their own positions. An arbitrator, he or she is receiving information from the parties can ask questions for clarification, and to probe the party's position. In the end, the arbitrator makes the decision based on the evidence that's provided by the parties. So it's an important function that an arbitrator has. Historically, an arbitrator is seeped in the industry for the case that's being decided. So there are some arbitration programs, let's say in the diamond industry. Arbitrators there are merchants who regularly buy and sell in the diamond area. So the purpose of having someone like that who is a subject matter expertise, is that the arbitration process itself would be shorter because you're not educating the individual who's making that decision. Now, where is arbitration prevalent? Well, today, you can almost seen it, see it almost every place. How many of you have heard about collective bargaining agreements where the person who is bringing in action is a major sports figure? You see this in the baseball area and in basketball and in football. These are typically management labor to disputes, and they really turn on contract provisions that the parties have between them. So you know, they are subject. These are what's called collective bargaining agreements. And the agreements cover individual workers who are the sports figures. Or if you're in the construction area, it could cover any of the laborers in the construction area. There's a unique system in California and it's growing up throughout the United States. A separate ADR program for worker's comp claims. The purpose of these programs is to take worker's comp disputes outside of the state programs, which typically take very long and ensure that a worker who's injured on the job can receive their healthcare benefits early and fast. And then get back to work quickly. So you'll find the arbitration in a workers comp context. What's important about many of these collectively bargained ADR agreements is that they do provide for mediation, they do provide for intervention, and the final act is arbitration. Cases rarely get to arbitration. You find arbitration and consumer disputes. Read about it in the paper, all the time. MasterCard has an arbitration agreement, whereby if you have a dispute regarding payment of your credit card, then you go to arbitration over it. Some computer companies, when you purchase the computer have an arbitration agreement. Real estate transactions, when you engage a broker, real estate broker to sell your house, you're very likely to have an arbitration clause in that binder. And then also, tax preparers. H&R Block is one of the major users of arbitration. In the employment dispute area, we have seen a lot of companies utilize employment ADR programs. The reason they use it is to ensure, you know, that employees who are disgruntled have access to a process where they can resolve disputes and maybe retain that employee within the company. So many organizations, many corporate America organizations have an employment ADR program that they make available to their employees. Some of these programs, the employer will actually pay for a lawyer or pay for a portion of a lawyer, lawyer's fees. And in other of these programs they may even offer or recommend legal representation. So anytime you go to work for a new company, look to see whether there is an employment ADR program. And then finally, as far as I'm concerned, the biggest dispute resolution program is the securities industry, where if you open up a brokerage account at a broker dealer to buy and sell securities, you will be subject to arbitration of any dispute that arises between you and your broker dealer. One aspect that people don't realize is that even, let's say there is not an arbitration agreement in your customer agreement, you can still require your broker dealer to arbitrate, but broker dealer cannot require you to arbitrate arbitrate a dispute is an important differentiation than in other aspects. Well, how do you get to arbitration? There are court-annexed arbitration programs. I'll never forget when I first became a lawyer my mother had a part of a presidential building with three other partners and one of the tenants had a dispute about damage to some of their property. And that person, that tenant felt that the landlord should be responsible. Well, my mother figured I was a young lawyer. She wanted me to represent the landlord. So I went to small claims court where the case was filed. I get there but realize that I had to be on an airplane in four hours. So I asked the court to delay or give me a new date for the court proceeding. Instead, what the judge did was send me to arbitration. So this is just one example of how you might end up in arbitration instead of court, because you're there is a court-annexed arbitration program. As I've said a number of times, you can agree to arbitration, post dispute, or you may be subject to a pre-dispute arbitration agreement. The US Supreme Court in the 1980s really issued the landmark cases, enforcing arbitration, pre-dispute arbitration agreements. And the first case that held the enforceability of these pre-dispute arbitration agreements was Shearson v McMahon. It was followed by several others, which enforced arbitration in antitrust cases and an international cases. One important aspect that came out of these interpretations is that the arbitration clause is a separable clause from the contract. And what I mean about this is that the court will look at the arbitration clause and enforce the requirement to arbitrate even the validity of the contract itself. So the clause is used to decide the forum. And then once the forum is decided, if there is a valid arbitration agreement, then the arbitrators will decide the validity of the contract or any aspect related to the contract. So that really is an important thing to remember. Now here, I am giving you a few examples of arbitration clauses. This one is what's called a broad arbitration clause. And what I mean by a broad clause is that any controversy claim or dispute that arises out of the contract can be brought in arbitration. It's broad enough to cover contract, tort, statutory or any other type of claim, as long as it relates to or arises out of the contract. These broad clauses, it's recommended that you include who the administrator is and what rules would be in effect. And also, that the award itself of the arbitrator can be entered in any court having jurisdiction. It's becoming pro forma that these broad arbitration clauses should also include arbitration. I mean, I'm sorry, include mediation. And the location, meaning whether the mediation or arbitration should occur where, you know, the employee resides or we have a customer resides, or in this state where businesses are incorporated. Today, most agreements also talk about whether or not the mediation or arbitration proceeding could be virtual, or you know, other means such as a written statement of a proceeding rather than a live presentation. And then lastly, it's important to include the law of what state would would apply both procedurally and substantively. Again, all important aspects. And by including each one of them, you reduce conflict or dispute about the clause itself. And you can get right to resolving this name dispute between the parties. Recently, the American Arbitration Association amended its commercial arbitration rules. And in doing so, included a model clause into their rules. This is a departure from in the past where it's just been an education piece. And in fact, if you go on the website of the AAA, JAMS, CPR, they have a whole page that's really devoted to arbitration clauses, the types of arbitration clauses, the meaning of many of the provisions, so it can be used for guidance and to provide clarity. So you should use those resources because they're very important. There's also what's called a narrow clause. There are many clauses that are limited to either a contract dispute, or a tort claim, or a statute statutory claim. And we require that or a party may require it, because maybe they only do business with a counterparty involving certain issues. So these are narrow clauses. They can also be limited to a particular dollar amount or start at a particular dollar figure. These types of clauses could be used to challenge the arbitrators jurisdiction and undermine the award, especially if an arbitrator makes a decision that's outside of those parameters. Again, borrowing from practice. This last type of limitation could also be used in what's called baseball arbitration, where the parties have resolved through settlement discussions or mediation. All but one or two discrete issues. So for example, in a case that I was involved in the parties wanted to fund a trust, but they couldn't decide how much to fund a trust. So they use brackets to limit the upper exposure for one side and to preserve the lower amount on the other. After the arbitrator was appointed, one of two ways the parties could go. The arbitrator would receive all the evidence and maybe know what the brackets are. That's called daylight arbitration. But the arbitrator when they're finally making decision can only make an award at or within the brackets. Another way to do it is nighttime arbitration, where the arbitrator doesn't know what those brackets are. And if the arbitrator makes an award either above or below what the brackets are set, the award is moved up to the low of the bracket or brought down to the high of the bracket. So it can be a very good tool for the parties. So in summary, the arbitration clause must express an intent to arbitrate, define the scope of the disputes to be resolved, identify the framework for arbitration, meaning it must include whether it's an ADR provider rules or something else and provide for evidentiary rules. Again, a word of caution. Sometimes parties write an arbitration clause and say, the rules of civil procedure will apply. That's just too broad and you're better off referring to arbitration provider rules. The arbitration clause must identify any preliminary conditions, meaning what kind of notice should be given of the dispute whether the parties must mediate beforehand, and then the arbitration clause must provide for an enforcement mechanism. So here are some examples of in artfully drafted arbitration clauses. You know, what's wrong with these clauses. The first one, any dispute under the contract will be submitted to arbitration within three days of the dispute arising and an award will be rendered within a week of the dispute arising. This is not possible. Arbitrators can't be selected, nor the parties agree on an arbitrator within that short period of time. The second one arbitrators shall be experts on the geology of tectonic shifts and the impact of shifts. Well, you know, if you go ahead and try to find somebody with this experience, you may be lost because that's just not possible. Another provision that's wrong is there shall be no discovery. You know, one of our parties are entitled to get information before the arbitration hearing, so that they can build a proper defense against the claims that are being made against them. So a clause like no discovery will be stricken. Another clause, the hearing shall take place in SriLanka, when all the parties are located in Minnesota is likely to be stricken. Another no witnesses shall be called to provide testimony. Well, testimony can be received either in writing or orally in person. But even in international proceedings, where testimony of direct witnesses is provided on paper, those witnesses are required to present themselves for cross examination. So that provision would be set aside. Then lastly, discovery shall be in accordance with the applicable civil discovery rules as a court of competition jurisdiction within the state where the proceedings are to be heard including, again, something that is just not valid. Discussion about arbitration shouldn't end until you talk about administered versus ad hoc arbitration. Administered arbitration is one where an ADR provider like the AAA, JAMS, et cetera, really administered the proceedings. They collect all of the fees, can an important aspect because we've seen arbitration awards set aside on the basis of bias, where an arbitrator disbanded or stopped proceedings because he didn't receive payment. So having an ADR provider handle the money, as well as all of the notice provisions and arrange for hearings facility your makes life much easier for the parties themselves, as well as the arbitrator. It really provides certainty. And as the general counsel of the AAA once said, these are tried and true processes that have been tested through time. In an ad hoc process on the other hand, the processes handled solely by the arbitrators. It can be tailored to the needs of the parties and the value of the dispute, but it does require the parties to collaborate on the rules unless they are detailed in the agreement to arbitrate, which is usually not likely. And once parties have a dispute, their collaboration and so it's just not viable in most cases. And recently, CPR has offered a service so that they will collect fees and then do some administrative processing for a fee. But otherwise, it's the arbitrator who serves as both the arbitrator and administrator. These type of ad hoc cases, primarily happen in the international arena. Privacy or confidentiality in court. This is an important aspect. Parties want to file cases in court because they wanna shame the other side. Court proceedings are open to the public. You know, you can just walk in. Any interim decisions are publicly available. And the final decision if it does go to trial and a decision is publicly available. So you know, there is precedent that's developed, and parties can use that precedent for future similar cases. So, you know, many times there is the public right to know. On the other hand, you know, there are some disputes that a company might wanna keep private, because of embarrassment or potential other exposure. So that's when the parties might decide to arbitrate the dispute. The confidentiality provisions in arbitration aren't really stemmed from the provider rules. In most cases, by under the AAA and the JAMS rules, it applies to the arbitrators and the administrators. CPR has a special provision that basically says that not only the forum or the arbitrators, but the parties must maintain the confidentiality of the proceeding. The AAA just amended its current commercial arbitration rules effective September 1, '22 to give the arbitrators the authority to issue confidentiality orders binding on the parties. So this is a new rule that applies to all cases filed on or after September 1 of this year. That expands the confidentiality provision that was already there. Arbitration proceedings are closed. As I said earlier, you can just walk in. And the final decision is private. There are some accent exceptions. So in securities arbitration and in the AAA employment arbitration areas as well as arbitration of certain types of dispute in California, they are all available those arbitration awards are publicly available. Also, if a party files a motion to vacate, they have to attach their arbitration award. So the award becomes available at that point too. There are some procedures where a party can ask that the award be redacted, or you know, some sealed. But in general, courts are not very amenable to allowing those processes. Basically, the court says you chose arbitration and there's really no provision once you file a motion to vacate. Under that process, the award must become publicly available. Representation in court. In court, you must be represented by a lawyer admitted to the bar in that state. Each state, however, has a process called pro hoc vice, where let's say a lawyer from New York can be admitted for the purposes of representing a party in that particular dispute in California. It's a court administered process that the parties go through. And usually it's granted without problem. Also, an individual or sole proprietor can represent themselves under court rules. That's what representations like in court. In arbitration, a pro se is generally the individual bringing the action or defending or a corporate representative. In certain states, California and this one that comes up all the time, a lawyer admitted to practice of law in the state that can represent a party. But some states again, California and Florida, you have to be admitted pro hoc vice to represent a party even in arbitration proceedings. In arbitration, there's a cottage industry that has been developed where there are non-lawyer representatives. These are individuals who have a lot of experience in the securities industry and they represent parties in arbitration. There are limitations on this. FINRA has a whole section, giving guidance to pro ses on whether or not to use a non-lawyer representative. You can also have an advisor. You can have your priest, rabbi, your tax advisor, or other expert be your advisor in an arbitration proceeding. Ultimately, you should be guided by ADR provider rules, or state court rules about whether or not an individual can represent a party in arbitration in that particular state. So what did the ADR rules say about representation and arbitration? The AAA Commercial Rule 27 says, any party may participate without representation, be pro se, you know, or by counsel or another representative, unless that choice is prohibited by applicable law. What's important to note is that the AAA rules don't say who decides. So oftentimes you'll see a party going to court or to the bar association to stop someone from a person who is representing them. The JAMS Comprehensive Arbitration Rules have a provision that gives you guidance. Here, though, the arbitrator may withhold approval of any intended change or addition to a party's legal representative, where the change will compromise the ability of the arbitrator to continue to serve. So here, you know, the JAMS rules expanded on the representation aspect. And then FINRA, very recently changed their rule to say that you could be pro se, you can have someone who's admitted to practice in the state. But anyone that's prohibited by state law or disbarred or suspended cannot represent a party in arbitration. And in terms of who decides it they said, they really say it's the state or regulatory body who makes that decision, not the arbitrators. Well, how fast is a decision in court? Here it says, you know, I've put out it could be more than one year can be much longer than one year. It's not unusual for cases to languish on a court docket for three, four, or five years. And it depends on whether it's a judge trial or you're required to bring in a jury. There's full discovery in court and it's managed by the judge. So that takes time and takes money. There's extensive motion practice in court that delays decision making. And one important aspect that people don't recognize is that evidence is subject to strict application in court. So you might find evidence that you want to submit in court really disallowed. So you know, that's an important thought that you should consider. And then finally, substantive appeals aren't have to be supported by a record. And if there are judicial errors, you can have that decision set aside and you'll have to go back. Arbitration on the other hand can take weeks or months, not years. It also depends on whether you have one or three arbitrators. If you have three complicates scheduling in arbitration, there is discovery, but it can be limited to the relevance of the dispute. Motion practice is limited. And in fact, in many cases, you have to ask the arbitrator, you know, whether you can file a motion to dismiss. And in asking the arbitrator, you have to make a showing that you will prevail, there's a likelihood of you prevailing or limiting the issues in the dispute. The arbitrator has the discretion to manage the hearing and evidence. And the decision itself doesn't have to be 20-page opinion. It can be bare bones and just say this person won or loss or can include a statement of reasons. There is now an increase in what's called arbitration appellate practice. Where in limited circumstances a separate arbitration panel reviews the case or the decision of the first arbitration panel. But there's very little experience even though it's been in the rules for at least 10 plus years. In the AAA just amended its rules to allow the arbitrators to clarify their decision at the request of a party, but the arbitrator doesn't have to. And in fact, can reject that. This is another provision that went into effect September 1 of this year 2022. Stages of arbitration there's just follows. What a court does is a filing, preliminary conference, motion practice, hearing, and then post hearing submissions and award. In arbitration, a lot of people have attacked arbitration because they say that the parties aren't provided due process. Well, there now are several types of protocols that include requirements to provide fundamental fairness in the arbitration process, and require clear notice of an arbitration agreement before the parties enter into a transaction. It requires that the arbitrator be neutral and competent, and that the administrator at themselves be neutral. In some instances, it allows the small claims court access, especially for a small dollar amount case where it's unlikely that a pro se person will travel any distance to file the case or to have the case heard. It's got to be reasonable in terms of porous cost and have a location that's accessible to especially a small investor, or consumer. Hearings have to be fair and you have to receive the same remedy as you would in court. So these due process considerations have made arbitration more attractive and put it on similar footing to court. There are consumer health care and employment protocols that are available. And you can find, I just use the AAA sites for you, but you can find similar protocols in JAMS and CPR. Motion practice and discovery in court you receive the full panoply of motion practice. So you know, you can have statute of limitation, motion for summary judgment, et cetera. It's whatever you wanna spend to frustrate the other side. And here, those broad discovery is monitored by the court. You can have any number of depositions. Depending on the type of case, especially a personal injury case, there's a physical examination of the individual who's injured. And you know, the court will monitor the protection of documentation so that the documents are authenticated. If you want a subpoena, it's subject to the Federal Rules of Civil Procedure. And the clerk of the court issues the subpoena. The party who wants it fills out the form but it's the court who issues the subpoena. In some instances, then attorney may also issue a subpoena if the attorney is authorized to practice in the court, where he's asking the subpoena to be issued. So subpoenas are a very nuanced area that you really have to understand in court. In arbitration, motion practice and discovery is allowed. It's not prohibited, but it is limited. Under the JAMS Comprehensive Rules, the arbitrator, you know, can issue summary disposition, either by agreement of the parties or the request of one. As I've said a few times, if they allow a motion to be made, the party requesting the motion has to show that is likely to succeed or can narrow the issues. Similarly, the AAA has rule 34 and E-5 which allows for dispositive motions, again succeed or narrow and issue. CPR, arbitrator may permit. FINRA rules, it says that this motion practice is discouraged. And if it's allowed, it must be unanimously decided by all three arbitrators that there's a panel of three. Discovery under the comprehensive rules, they have a whole protocol for it under their expedited proceedings. And under the AAA Commercial Rules, it's the arbitrator who decides the need for discovery. And again, CPR says that the arbitrator facilitates discovery. FINRA has a novel way of doing it that actually has been borrowed by the AAA. FINRA has production lists that they make available to the parties so that someone who doesn't know the securities area is educated about what to ask for. The AAA has similar lists in the employment area and the consumer area. In court, when you want evidence admitted, it's subject to the rules of civil procedure. And there are very strict rules that apply to attorney/client privilege, work product, and relevance must be established. Hearsay evidence, meaning evidence not directly heard by the person testifying is excluded. State courts have their own evidentiary rules. In arbitration, the only evidence about, the only rule about evidence that should apply is that the arbitrators should act fairly and permit the introduction of evidence. So generally, it should be material and relevant. But in general, basically what a party does if an arbitrator determines that, or if a party objects to certain evidence being admitted, the party who wants to admit it says we understand but we ask that the arbitrator admit the evidence and place whatever weight they deem appropriate. In court, the award itself, again is publicly available. It could be a slip opinion with says a party lost or won or could have a full, you know, reasoned opinion. But they normally do judicial words normally contain the name of the judge, a statement of the facts, the legal issues that were decided, and the courts rationale. In arbitration, the arbitration awards as I've said earlier, are not publicly available, unless the rules state that they are. So the AAA employment arbitration rules or the FINRA rules make those awards publicly available. The AAA Commercial Rules set rules say that the award must be in writing, signed by majority of the arbitrators in the form and manner required by law. It need not be a reasoned award. But more and more parties are requesting that the arbitrator provides a reason an award, and they must do so before the arbitrators are appointed. The JAMS rules also require that the arbitrator sign the award, and that each of the claims are disposed of and include a concise written statement other reasons. FINRA rules don't require reasons, but they do have a lot of requirements for the case details and an acknowledgement that the arbitrators have read all of the pleadings. And CPR parallels everybody else's has to be in writing and state the reasons on which the award was decided. In court, there's a substantive right of appeal based on the record. The court reporter maintains a record and it's available to the parties. Appeals are based on errors in the trial procedures or maybe the judges interpretation of the law, or where the judges gave a jury improper direction. There is a special now appellate arbitration process. And JAMS, CPR, and the AAA had these roles. As I mentioned earlier, these are very rarely invoked. And from what I've heard and speaking to parties when they do invoke them, they wish they had not. An arbitration award itself is subject to a motion to vacate. So you look at the Federal Arbitration Act, and each of the states have their own acts that parallels the FAA. And says that there are standards for the vacatur of the award is the award has to be procured by corruption, fraud, or undue means. There is evident partiality or corruption of the arbitrators, maybe the arbitrators are guilty of some sort of misconduct or they exceeded their authority. So as you can see, it's very, very limited, and most arbitration awards cannot overcome these limitations. So in conclusion, you know, arbitration is a choice. You could go to court or you could go to arbitration. When you think about arbitration, it does satisfy due process requirements. There is a move to arbitral litigation, where arbitration is becoming more like litigation. But I think that it's still a viable alternative to court. And I hope that through this process, that you've been educated on how to make decisions about going to court or arbitration. Thank you for your time today.

Presenter(s)

Deborah Masucci
Attorney
Masucci Dispute Management and Resolution Services

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