Arbitration

Arbitration

Arbitration is a private, contractual process, by which parties to a dispute request one or more knowledgeable individuals to determine the rights and obligations of the parties rather than having a court do so.  Arbitration can be designated by the parties as either binding or non-binding, although most commercial arbitration cases are conducted as binding arbitrations with very limited grounds of appeal.

As in mediation, the parties are in control of the nature of the process to a large extent; but, unlike mediation, the parties do not control the decision.  Below are some of the matters that parties can decide with respect to an arbitration:

 

  • Administered or not.

Parties can determine whether they would like a case administered by an established arbitration organization, such as the American Arbitration Association (“AAA”) or the International Chamber of Commerce (“ICC”), or that the case be self-administered by the arbitrator.  The organizations have a trained staff to handle procedural matters relating to the arbitration and panels of trained arbitrators to present to the parties for their consideration in exchange for which they will charge a filing fee.  If the parties have directly selected arbitrator(s), they may wish that the case be self-administered.

  • Number of arbitrators.

Parties can decide to have a single arbitrator hear a matter or a panel of three arbitrators.  Almost all international arbitrations have a panel of three arbitrators.  Domestic arbitrations vary depending on the amount in dispute and the nature of the issues.  Construction arbitrations most always have three arbitrators: one lawyer, one architect and a contractor or other person knowledgeable about construction.  Commercial arbitrations today often have a sole arbitrator who has been trained to handle complex cases.  Three arbitrator panels, of course, are more expensive and often more difficult to schedule because the schedules of more people have to be harmonized.  On the other hand, because arbitration decisions are final and binding, many parties prefer the judgment of a trio of arbitrators to that of a sole arbitrator.

  • Qualifications of the arbitrator(s).

Parties can designate that the arbitrator(s) have a particular industry background or training if that would be important to understand better the issues to be decided.  For example, in a dispute between an author and a publisher, the parties may want an arbitrator with familiarity of the publishing industry.

  • Location of arbitration.

Parties can designate the location where the arbitration is to take place.

  • Rules to be applied.

Parties can designate a set of rules by which the arbitration will be conducted, such as the Commercial Arbitration Rules of the AAA or the Rules of the ICC and modifications of those established rules in certain particulars noted below. Absent the specification of a set of rules, the arbitration will be governed by more generalized procedures in the Federal Arbitration Act and various state laws, if a domestic dispute, and the UNCITRAL rules, if an international dispute.

  • Discovery.

Discovery in arbitration is more limited than that provided by the Federal Rules of Procedure in keeping with its more informal nature.  However, parties can designate that Federal Rules of Procedure will be in effect or specify the number and duration of depositions, if any, the parties can each take.

  • Nature of the award.

Parties can determine the nature of the arbitrator award they would like to receive.  The choices range from a bare-bones award that Party X shall pay Party Y $x.xx, a summary award where the arbitrators offer some of the reasoning behind their decision, and a full-blown reasoned award with findings of fact and conclusions of law similar to a judge’s opinion.

  • Scope of award.

Parties can limit the nature of relief that an arbitrator can award.   For example, they can specify that the arbitrator cannot award punitive damages, or that the award will be limited to money damages only and no other form of relief.

  • Time limits.

Parties can specify certain time limits within which hearings must commence, the duration of each party’s presentation and the time within which an award must be submitted.  Most rules provide for a thirty-day period from the close of a case for the issuance of an award, but the parties can shorten or lengthen that period.

  • Appeal rights.

While this is a subject of significant disagreement in the Federal Circuits and in some states, such as California, parties in some jurisdictions can provide for an appeal from an award to another panel of arbitrators, or can attempt, but not in the 9th Circuit, to broaden the standards of appeal from those limited ones provided for in the Federal Arbitration Act.  The American Arbitration Association recently promulgated Optional Appellate Arbitration Rules, which provide for a high level review of an arbitration decision by a panel of former judges or experience appellate lawyers.  See http://www.adr.org

This is not intended as an exhaustive list of all possibilities that parties can provide for.   There are several excellent treatises, which explore these matters in depth, and each of the arbitral organizations has suggested arbitration clauses on their web sites for consideration.  See www.adr.org, www.iccwbo.org/court, www.cpradr.org


Advantages of Arbitration
  • Confidential.

Arbitrations are conducted in private, and arbitrators are bound to keep the proceedings confidential.  Usually the parties will enter into a Confidentiality Agreement, which can protect what is stated in the proceedings or received in discovery from being used in any subsequent proceeding or otherwise disclosed.

  • Speedier.

Most arbitrations can be concluded in a shorter time period that even so-called “fast-track” cases in court.  As noted above, parties can specify time limits for discovery, commencement of hearings and duration of hearings, if they wish.  Even absent such limits, most arbitrators will attempt to push a case along as fast possible in keeping with the tradition that arbitrations are to provide swift justice.

  • Convenient.

Cases are heard in a location favored by the parties, not where the courthouse is located.  Most arbitrators will be sensitive to and accommodate counsel schedules and conflicts within reason.

  • Informal.

While arbitrations are serious matters, most proceedings are conducted in a more comfortable and relaxed setting than a courtroom.

  • Less Expensive.

To the extent that discovery and motion practice is limited and over-all time to decision is reduced, arbitrations will be less expensive than a comparable court proceeding even taking into account the arbitrators’ fees and administration fees.

If one takes into account the finality of most arbitration awards, then over-all litigation expense is certainly reduced.


My Arbitration Background and Experience

I began arbitrating for the American Arbitration Association more than 30 years ago and have arbitrated over 170 domestic and international commercial and consumer disputes, over a wide range of business, intellectual property and public utility issues.  Representative cases include:

  • International
  • dispute between an American veterinary testing equipment company and a Swiss distribution company with respect to development and exclusive distribution agreement;
  • dispute between United Arab Emirate purchaser of U.S. hardware /software subsidiary of  an Israeli corporation over breaches of warranties;
  • dispute between a German manufacturer and a U.S. university over a patent license;
  • a dispute between a Japanese manufacturer and a U.S. OEM over breach of warranties;
  • dispute between U.S. software supplier and Swiss distributor over termination of distribution arrangements.

 

  • Commercial
  • dispute between engineering design firm and manufacturer over breach of design-build agreement for process equipment;
  • dispute between governmental agency and service provider over termination of services agreement for alleged breaches;
  • disputes between a life insurance company and its policyholders over sales practices;
  • dispute between a limited partner and a general partner of several limited partnerships over access to a mailing list of limited partners for purposes of making a tender offer;
  • dispute between a telecommunications component manufacturer and a customer/competitor over a requirements agreement with an anti-trust counterclaim;
  • dispute between a law firm and a former partner over the misappropriation of a client fee and other issues;
  • dispute between two companies in the GPS field over breaches of various agreements and an earlier arbitration award;
  • dispute between investment banker and client over payment of a success fee.
  • dispute between the seller and buyer of a software business over earn-outs and indemnity obligations.

 

  • Intellectual Property
  • trademark license dispute between licensor and licensee over compliance with and termination of license agreement;
  • dispute between patent licensor and licensee over breaches of patent license and alleged fraud;
  • dispute between a software company and a major medical laboratory over breaches of license agreements and alleged copyright infringements;
  • dispute between a founder/inventor and a company over rights to patents assigned to the company;
  • dispute between a software developer and an original equipment manufacturer over testing equipment license fees;
  • dispute between a software company and a distributor/plug-in developer over issues relating to a preferred publisher agreement;
  • dispute between a software company and a quasi-public entity over alleged breaches of software license agreement;
  • dispute between two software companies over alleged breaches of a settlement agreement arising out of a misappropriation of trade secret lawsuit;
  • dispute between a software company and a medical laboratory corporation over alleged breaches of a software license agreement;
  • dispute between software company and software developers over deposit of source code into an escrow and other issues including trademark misappropriation;
  • dispute between licensor and licensee of certain technology used in the security field.

 

  • Public Utility
  • dispute between a public utility and its fuel provider over a long-term fuel contract;
  • dispute between a public utility and a Qualified Facility over a power supply agreement;
  • dispute between a wholesale public utility and several municipal electric utilities over appropriate charges under a unit sharing agreement.

In these cases, I have served as a sole arbitrator, chair of a panel of three or as a side arbitrator of a panel of three.

I serve on the AAA’s Large Complex Case, California Energy, Northern California High Technology, National Technology and International Dispute PanelsFedArb’s Arbitrator Panel, and the Panel for disputes with the Kaiser Medical System.

I have participated in a variety of arbitrator training programs since 1992 including the AAA’s Securities Arbitration training, International Arbitrator training, Commercial Arbitrator I and II trainings, and workshops for the Large Complex Case Program and International Arbitration conferences sponsored by the London Court of International Arbitration, The Chartered Institute of Arbitrators and the International Chamber of Commerce.

I am a former chair of the Arbitration Subsection of the Alternative Dispute Resolution Section of the Bar Association of San Francisco and a member of the Dispute Resolution Section of the American Bar Association.  I served as President and Director of the California Dispute Resolution Council, am a Fellow of the College of Commercial Arbitrators and a panelist of the National Academy of Distinguished Neutrals.


References and fees upon request.